Webinar replay: Thematic investing - Structural themes, technological change and the consumer

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  • 57 mins 06 secs

Learning: Unstructured

We believe now is a compelling time for consumer trends. Not only are consumer trends changing in the short-term as we emerge from the Covid-19 pandemic, but in the longer-term with the introduction of new technologies and increasing connectivity changing how we shop, consume our media, spend our leisure time and make decisions, and as a result; how we spend our discretionary income.

But the question is, how is the consumer positioned to benefit from these?

Michael Joynson, Head of Market Insights, is joined by Corinna Lau, Head of Asia Products and Greg Holland, Senior Client Portfolio Manager discussing the themes that they see are benefitting from this disruption and taking share within Asia and across the Globe.

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Important information
Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.
Invesco Asset Management Limited, Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH, UK. Authorised and regulated by the Financial Conduct Authority.

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Good afternoon everyone and welcome to this panel debate to discuss the major trends that impact in the consumer both today and in the future and looking at it both on the sort of global and more specifically from an asian perspective. And we'll also be looking at you know, where the opportunities are to live to be fined to export these things. I'm Michael johnson ahead of the market insights team at Invesco, delighted to be joined today to discuss this by an international cast, Carina Lau, who is head of Asia Products based in Hong kong, and Greg Holland, a senior clan portfolio manager with the U. S. Growth Equities team based in Houston. And the format for those who have not been involved in one of these before is that I will briefly set the scene to the debate and then asked the panel a series of questions and this will last for around 35 minutes will follow on from that with a sort of 15 to 20 minute Q. And a session answering your questions. You'll see a box on the screen which you can ask your questions through which you can do at any point during the webinar at the end of the panel debate, I'll also be polling you on a question relating to what we've discussed and the process for answering that is a very simple one and is done within the slide screen. So let me uh First of all sort of quickly set the scene. I've just got one sort of slide here and this looks at household consumption as a percentage of GDP in 2019. So the last year before the pandemic, um you can see that consumption is the most important component of GDP in most major economies, both in developed markets and in Asia, you know, around two thirds in the US and UK and over 50% in the Euro zone and Japan in ASia, with the exception of India, their share is sort of generally lower, but it's still very substantial. You can see here that china obviously is a sort of clear laggard 2019, it was just under 40% of GDP and still in China investment is the most important GDP component. In 2019 it was 43%. But this is expected to change as a Chinese government over the coming years focus increasingly on moving the economy away from one that was very much focused on investment to one that has an increasing emphasis on Consumption now. And clearly there's a massive opportunity set uh here for companies to exploit, given the importance of household consumption. I'm sure that Karina and Greg will highlight many of these over the next 50 minutes also. So to start the debate, um, yeah, I don't think either your team Carino Greg or your products are particularly well known to the participants. So the great if both of you could briefly introduce the teams behind the both the global and asian funds that are export focused on exploiting these trends and also the processes but behind them. And if I could start with you, Greg. Excellent. Well, I'm sure I'm off mute. And I am so howdy and uh good morning, good afternoon to everyone. And uh, it's a pleasure to join you. I would say that uh you know, invest go as you are familiar. We've got investment centers around the world. I think we're in 26 countries now. The growth equities team that as Michael mentioned, uh I'm a part of his US based, we're in Houston texas Representing about $65 billion 18 portfolio managers and analysts. All of them are sector experts. The portfolio managers and analysts themselves as well. The hallmark of our team is, uh, is really, it's, it's experience, there's 25 years of average experience deploying capital for investors across the team regarding the investment, global consumer transformed. Um, this is an active research based approach to capturing changes in consumer behavior. We're looking across geography. These were looking up and down the market cap spectrum. Uh, and just by way of completion of, of of an introduction, we just last month eclipsed our ten-year track record, uh, deploying capital in this strategy and very pleased to have built a $7 billion dollar franchise. I'm Karina. Yes, so for the good morning first and good afternoon for everyone. So myself, I'm from the Asian team. So we manage the Asia consumer demand fund here, based in Asia. So it's 17 investment professional bus and we're actually from different different countries, different markets in Asia, basically located in Hong kong and for my colleagues in Singapore shanghai and Taipei, I was said we are very much a regional team with investment professionals, say from indian nationals from different parts in china Koreans, Taiwanese, Hong kong singaporeans. So what we do offer, you know, for our investor and in terms of the way we manage is that is very much underground. I would say we ourselves offers hand consumers. I would even say we we know the local preferences, but we are actually the local preferences of the local consumers. That so I think that's one of the very good or strange, you know, in in managing or looking at the consumer trends here in Asia. Uh, the other thing is worth mentioning is that the team has been working really closely and for a very long time, myself, actually been with investable for 20 years now and outside, Oh has been with us for 18 years and for a number of our investment professionals, say senior indian specialist korean specialists, etcetera. They have all been working together for over 12, 13 years. So again, it's very close team. So in relation to say, for strain discussion, debate, etcetera, um that is actually a very good discussion most of the time because we do have a lot of trust within, within the team Now for the Asian consumer demand funds. Um, I would say it's one of the longest standing Asia and consumer demand fund that you will see in the markets. We actually launched this fund in 2008. So we do have more than 12, 13 years of track record now and back down. We've launched with the aim of looking forward into the opportunities going forward. And that's where we see a lot of growth opportunities coming out from the domestic, domestic consumer areas. Okay, thanks very much Karina and Greg. I mean Greg, I guess an obvious question which will probably come up in the Q and A. So I'll get there before before the audience does is, you know, I mean, do do your two teams work given that you're focusing on, you've got products hosting on on the same area? Do you work together or completely independently of each other? A great question. The best way to describe it as collaboratively independent. One of the strengths of the disco is having his career just said, the ability to have dozens of teams that focus in on a specific region, market cap style and achieve really bespoke outcomes for clients that are looking to fill a particular niche. Um And and Invesco does that by staffing up full teams that can do that very well. What I would say collaboratively is that investigators built a platform that leverages the $1.5 trillion we have in scale by leveraging shared platforms with access to company management, to trading to proxy voting governance across across the system. We've leveraged are massive scale and also leveraged the ability for all the investors to come together and have intellectual compounding by uh we have thought leadership exchanges that used to be in person and maybe one day we'll be in person again very soon. Uh Now they're digital for the time period. There's thought research forums, there's investment calls for participation uh from our investors around the globe and both koreas team and my team overlap and are collaborative within that process, The consent to the portfolio level. Both of our teams are doing independent research on companies, doing our own valuation assessment, coming up with our own price targets and outcomes. And the portfolios look very different and are are done by the teams themselves on a separate basis. Okay, thanks very much Greg. So, I mean I guess the sort of overarching question here is, you know, I'll put this to you, Karina first is you know, why should investors be considering the consumer space as an area to focus on currently? Yeah, I think investors, if they're looking at the consumer space, I think two key things first is actually from a long term perspective, there are really a lot of, I would say structural growth drivers. Those growth drivers have, I would say started quite a number of years ago and they are actually continue using it. And of course in a short time we do see catalyst as a result of the economic recovery. First on the long term structural drivers. Um not to mention first would be very offices, the population that would seal in Asia. In fact, it's very much 60% of the world's population. So wherever there is people, there is consumers. So that you can see the very large domestic market that we have have here in Asia. And and and of course, of the large population. Again, it's not something that we're going to change overnight. So from that, you appreciate that we should continue to see the development of the consumer now for this fund where we launched in 2008 with the intention to take into opportunities together and grow together with the rising middle-income class in Asia. And when I talk about rising middle income class and increasing in terms of the income in ASia, definitely we're seeing that, I would say for example, in the case of china we're seeing double digit income growth. I would say early years for the last few years we're talking about single digit but high single digit, you know need single digits. So it's actually very strong in terms of income growth. And again because of that that increased a lot in terms of the consuming power consumption. Power. One more thing to note is the policy if again if I may take the example of china is a planned economy Um today, 2021 to 2025 Would be the 14th Five Year Plan. And government does have policy, as you earlier mentioned to dr domestic consumption. The five year plan predominantly is to bring china to a relatively prosperous society and you appreciate by that it means growing in terms of GDP and per capita income and as a result, you will see um you know, the strong drive from the domestic consumption going forward short term then from the cattle as we all know about the economic recovery. We talk a lot, you hear a lot from the headlines. In fact, I just want to mention one point here that's about the vaccination rate and pace in china. It was relatively, I would say. Let's talk about earlier again, there's a lot of success in the U. K. In the U. S. I went, We have a lot of the population, a large percentage of the population already vaccinated in China's case. It's actually very much wrapped up in the last 1 to 2 months on a daily basis. We're talking about 16 and 17 million versus for example, Europe. We're talking about 3, 3.3 million on a daily basis. So with that pace, um, we should be able to see majority of the population vaccinated by the end of the year. So that would again be another, I would say, catalyst um in the domestic consumption area. Thanks very much Greg. How do you see it from, from your side of things? From a global perspective. So, our thesis um has been that it's a really compelling time to invest in the consumer because because we're in a period of disruption where technology, technology enabled businesses, they're changing our behaviors, they're changing how we shop and where we shop. They're changing how we consume our media, our entertainment, our news and information, and all these are leading us towards increasingly digital lifestyles because we're increasingly connected and actually more importantly, connected to mobile devices. Now we're connected everywhere we go all the time. We've actually created more time digital and leisure activities being connected to information has also led us to more informed decisions were leading we're making more smarter decisions were also leading increasingly healthier lifestyles. So these shifts are massive. But what we find most powerful um, in driving our thesis and why we've, we've taken this approach to this fund is that the changes are global in nature. They're not just happening in the UK, there not just happening here in Houston texas or in Singapore or in the Ukraine. They're literally happening all over the world at the same time. And as I mentioned, you know, most of us have been doing this for multiple decades. It is rare, if not unique to be able to capture shifts in behavior, especially for the consumer, the largest driver of our economy to capture shifts in consumer behavior that are happening all over the world within an investable time horizon. Normally, these shifts happen in one country or region for five years and then they move slowly to another country region. So this period of disruption we're in is almost unique. Uh, and uh, in a period of disruption like this where shares shifting between old economy leaders and new economy winners, We think an active approach is the best way to be able to capture that, deliver that alpha to investors over time as opposed to looking backwards at what was happening over the last 10 years to try and make a projection for a reversion to the mean that's not going to happen. And so we think it's a really powerful time to invest in consumer trends. Okay. And if you could just sort of, you know, would like to sort of, you know, the drill down a bit more and identify some of the main investment themes currently. I mean, great, you sort of touched on digitalization already. I mean, the other other themes that are in focus currently you see just at a high level, I mean digitalization and this this move towards the digital lifestyle is a driver of so many different themes within our portfolio. E commerce is the largest in e commerce. Were especially focused on large addressable markets that are early in their shift online things like groceries, food and consumables, luxury goods and autos. Um, these are some of the biggest categories of consumption that are still early in their shift, online video games as an emerging form of media, online dating and other social media platforms, electric vehicles and autonomous vehicles and the platforms and ride sharing platforms, streaming media including videos and music. Uh, and we have early, early stage investments that range all the way from looking at space tourism, to biodegradable plastics for consumer use. So it's quite a wide ranging, wide ranging scope. And uh, Karina, you know, what sort of themes, I mean, I presume this, I'm overlap with Greg hair, but you know, what sort of themes are you sort of focusing on in Asia in particular? Yeah, I definitely agree with Greg in the sense that there are a lot of, you know, themes are universal in particular on the digitalization side in Asia in particular, we see a few themes, for example, privatization and by privatisation, I mean that where we hear Asians have rising income as a more income, people are generally more willing to pay more for, you know, for better quality goods and services. So that is definitely one thing that we've seen. So it's not only the very high end luxury and expensive goods that we see, but the privatization actually awkward across a broad, it could be a pipe of tissue paper, instant noodles, etcetera. The other thing is more specific to Asia, I will have to say urbanization. So at the moment, um, SE Asia in general, I think the urbanization rate roughly at 50%, if you look at the developed markets are developed, world is very much at 80%. And so historically urbanization very much equals to economic growth. And some of the research actually predicted that say for example, in China more than or roughly 70% of the growth from the domestic consumption area, actually from the rule of, you know, urbanized area coming up from the urbanization. So, so this, I would say I would say some of the trends and that I would say more specific to Asia. Okay, thanks very much. Um yeah, clearly we lived in a world of sort of pandemic for the last 18, 18 months or so. You know, we're interested to hear whether that has sort of created some new themes or sort of accelerated existing ones and Greg if I could try that one at you first of all. Yeah, I think, and I think we've got a visual, I want to say slide nine is probably act for showing this. But uh, the coronavirus look at hyper charged long term digital lifestyles because we went into a lockdown where the traditional models were closed, they were unavailable and for certain categories like e commerce, this brought new users to the platforms. Um, it brought it had existing users broaden out the categories of goods that they were buying online. It was a pull forward of growth. and we believe that that user engagement will be sticky and persistent and we're seeing that even as economies reopened, um we believe though, that e commerce, that's this is as sharp as the growth has been and the acceleration with Covid that we're still only about halfway to where we're ultimately going to get. Um and I think I'm not sure if this is not advancing, but uh on slide nine, there's a pie chart, but I would also say that what it also did was introduced to a new set of recovery assets we saw once in a decade valuation opportunities, Encyclical businesses that we're going to position to reopen and from a new theme in 2021 and 2022, which is living our real lives again. And we built out this experience, this piece of the pie businesses that don't have an online digital substitute um in order to capture reopening uh and capture these amazing evaluation opportunities that we saw beginning to emerge last spring and over the course of the summer. Built that out today, our portfolio has About 24, 25% in experiences themselves. And when we consider some of our digital businesses that are exposed towards reopening as well, including things like ride sharing booking dot com businesses that are exposed to online leisure travel. About a third of our portfolio today is also well positioned for a reopening of economies as well. So additional uh, the coronavirus is a global pandemic brought us uh we tried to find the silver lining in the opportunities in that as well and and being very active and I believe Karina's portfolio was similarly active to capture opportunity to Yeah, I mean, Karina binging again, you know Asia perhaps you know, it's going to be less impacted by the pandemic. Has the impact been there? Um in terms of can I show slide five slide 5 and some of the trends that we've seen in Asia. So you mean the pandemic in Asia? I think in terms of the pandemic in ASia generally Asia I would say in terms of the pandemic containment and do it relatively well. You actually he say for example in terms of china in terms of Taiwan corea in general, the um the you know the cover scenarios is is actually quite quite well but the culprit I would say also drive in terms of people awareness in terms of well being and health care. So you can see here on the slide on the right hand side, one of the key trains themes that we've seen in ASia is about increasing awareness of the health care now on that. I would say structurally something quite um different in ASIA is that we see the affordability as a key because I would say at this stage still not across the broad in Asia we are very a very high level in terms of GDP or income and in in certain markets the country in particular say for example in china the affordability has increased and as a result from a structural perspective they have been increasing. I would say demand will stand on the healthcare side now related more to pandemic. We talk a bit about the digitalization and of course in the health care sign, we're now seeing the development of what we call it holly Medicare. So that is where for example you go onto our website, you can actually see a doctor via the website. Now I would say we're at the very beginning of baby steps of that in a sense that at the moment is still more related to say the prescription of medicine. So you would appreciate that for some patients they may need to regularly see a doctor to prescribe the medicine and that does at the moment are very much, we'll be able to do it online very much as a result of the lockdown earlier as well. We're seeing that a very small fragment but going very fast um, and via the digitalization. So I would say the italian medicine, the healthcare provider digitalization is definitely one of the growing themes that we've seen in ASia. Okay, thanks for that. Yeah, I mean I'd like now to I mean when talking about thematic funds always think, you know, the most interesting part of any discussion is talking about the individual, um stocks, but particularly in the in the in the current Environment where so much is changing I guess 10 years ago a discussion around the consumer would be far less interesting than than than it is today. So I just like to sort of drill down into some of these sort of themes and you know perhaps we both sort of highlight um you know stocks that you hold in the portfolio which are particularly interesting and sort of reflect the sort of change in the opportunity set that right there. So we can sort of start off with this sort of digitalization. I'll use Karina sort of themes here as a basis for this. You know, we can start off talking about digitalization. I mean Greg give us a couple of examples of stocks particularly sort of interesting exciting in this in this area. So you know, we we discussed digitalization is striving so many of the themes that with within our portfolio. But you know, I think I can point to I'll start with an industry and then give you the stock at the end. But I think that the music industry is one that is quite attractive for us on a couple of scopes here. If you think about the music industry, They began, you know, 15 or 20 years ago, they used to sell us a package of goods depending on your age. That might have been an album, it might have been a cassette tape, it could have been a CD, but they would sell us 12 songs, let's make up a number for $12, a package of goods. And then During the age of the beginning of digitalization they move towards the worst business model. This was selling one song for a dollar. So a good song would make a dollar and an average song or a bad song made no money for the industry and the industry was in decline for 15 years today. What we've seen is a move towards the very best business model and that is a digital subscription that provides very high quality recurring revenue that's very visible. And there are few libraries that own the majority of music content in the world and control this. Um Sony is a significant example within our portfolio. Sony has a number of other digital drivers for them for them as well, but Sonia, a large driver of their Ibadan material portion of it, comes from their massive and very valuable music library that they license to all of the different distributors and all of the different distributors that we are subscribing to, our giving ad revenue to are paying a fee in order to use that music. So uh you know, the music industry is a great one that not only has uh a significant growth in front of it from, that has significant growth in from it actually coming from demographics from millennials and from the digital first generation behind them, that's going to be driving their business with increasing subscriptions for a decade to count. So content is king really at the end of the day, music, just being one example, we want content. One of our favorite things to find is content, be that music or be that video games that is already developed, that is getting increased distribution to a broader audience and video games for example, that's taking established intellectual property Games like call of duty, that activision develops over the course of the last 20 years and then moving into a mobile audience and launching that to emerging markets and opening that up to a six times larger addressable market. That's the kind of thing that we did very excited about. Okay, and Karina, from, from an asian perspective, can you sort of highlight a couple of sort of interesting areas in the digitalization space? So in the digitalization space, for example, we do have exposure in our website. Where is you have, you can find all sorts of different types of passenger cars. So basically all from the different manufacturer, the different models, So you appreciate them. Um, the consumer go in, they have chat rooms that they can talk about, the different types of models, why they like it, Why don't, why don't they like it? And of course they will be able to buy some of the water related gadgets or doing insurance or buy second hand cars, etcetera, on the website. So I was set on the digitalization side. Those are the some of the very exciting things that we've seen um basically reaching out to more people. Um and in the past we do have for example exposure via auto components part. I just want to mention one point about digitalization. Is that what we talk about it? The way our team look at it is that is not a narrow segment or sector it infects touches. We see it's more like a medium which it touches the all the very much the traditional or or the underlying industry. So here via this up to you know, auto passenger website is very much touching on or taping the very much the strong demand on the on the passenger comfort. So that is one of the examples in digitalization that we've seen. The other one that I mentioned earlier is about the health care. So it's very interesting on the website, you actually see the doctor's photo that you can see the C. V. You can actually see the price. So that was the price differentiation. If you basically want of easy like we'll be doing or if you want to basically have curious answer, it will be a different prices. So of course people will start up with, I would say very simple type of things, as I mentioned earlier, like prescription medicine, but that is something again that we see very strong worth. Okay, thanks. That we can sort of move sort of onto the sort of whole experiences sort of thematic Greg. Can you sort of highlight a couple of areas of interest there? I mean obviously we've had musical already but I know you've got a few more areas in your portfolio that are particularly interesting currently. Sure. So for for us experiences is very much about that in person experience. And just for a background change, I think slide 11 has the framework that we came up with last spring when we were trying to uh, we had engagement and through a diversified portfolios, owned one of the Messenger RNA platforms and had really good insight into vaccine Development, deployment, expected efficacy. And so we started to use this framework to deploy capital, understanding that vaccines weren't going to take 2 to 20 years to develop, but they would actually be developed, approved, highly efficient and probably delivered even within 2020 initial delivery. So that started to give us the confidence. And we started with uh, low cost in person, local experiences. And so that was a thing like, you know, a sit down restaurant that was pivoting its model towards takeout or delivery or fast food. And he's actually pretty quickly outperformed over the course of the summer. We used this framework to broaden our exposure and today we still have exposure to some of those names. Um One would be E. P. R, which is a really, we actually bought a read, a real estate investment trust in our portfolio. It was an experiential read. 50% of their properties are movie theaters and 50% of their properties are things like theme parks and experienced restaurants. Top golf is a driving range experience where you go and uh, it's digital, you know, digital games where you're actually hitting a real life golf ball and they're feeding you plenty of food and drinks for your family, family friendly entertainment. Um This is an area where we got exposure to movies and in person and to reopening at an incredible valuation and a much cheaper and better risk adjusted opportunity than if we had tried to invest in movie theaters by themselves. Um Today we've got exposure all the way to leisure, travel and experiences because everybody listening to this conversation, all of us really want and probably really deserve to take a good vacation and there's a lot of pent up demand to travel with loved ones and to go see loved ones. And so we have exposure in the portfolio to businesses like timeshares like travel and leisure, which is a timeshare business, is the former Wyndham resorts that just rebranded um to an all inclusive resorts company in the Caribbean and um and then to digital businesses that have exposure, especially to leisure travel in particular where there's there's pent up demand that we think will exceed previous levels. Okay, thanks. That, I mean, Karina, you mentioned urbanization and you know, I mean, clearly, you know, there's a very different trend here in Asia relative to the rest of the world. And I come on to Greg to talk about that later. But can you you know, just highlight some you know some areas that are a particular interest there. Yes. As I just mentioned, you know in Asia we've seen the urbanization trend and that's driving the next phase of growth Historically urbanization very much equals economic growth and we are seeing that happening. So if I may take an example in the case of China there is actually very specific plans in bring out urbanization. So as we speak there roughly around 19 clusters or or succeed is that they are we are creating in china. One of the, I would say more familiar ones you probably know about would be safe. For example Hong kong with Shenyang and also with the Guangdong province and that's what we call degree, integrating I would say a few provinces or cities together. Other, I would say a lot of different cities um that even myself I have not heard about but those are the cities with 89 million people. So that is the urbanization trend that we have seen now and we invest in companies that have specific strategy that takes on the growth opportunities bringing about for the organization. For example, we do have an economist company um They do have a large presence in our state, relatively lower t city um say Beijing, Shanghai will be the first year and then we got tier two, tier three city, say for example in china and they got almost like 60% of presence in the relatively military city. So what they do is that they focuses on group purchases and they are focusing on providing value for money for the consumers. So where you go onto the website for same products, you actually got to prices. So one top price is where you bought it, you buy individually and then other prices is if you want to do a group by. So what you do is that if you want to buy say a pack of tissues. But if you can ask say five friends to buy it together with you And you'll be able to form a group, say within 24 hours you'll be able to get a discount. So you will see the those in a way will lead to more people buying it. It's almost like free advertising where you bite your friends to buy the same products together with you and where you got a discount. So that is again because it taping for the value for money it does directly got very well, they were very strong in the rest of the lower the city and and also I would say would be specific stock example that really are able to benefit from the urbanization. Okay, thanks Greg. You know, I mean there's been a lot of track particularly here in the UK about people not wanting to live in urban areas and property markets outside love and for example, being very strong as a consequence, you know, in the back of, you know, what's happened in the independent pandemic, you know, I mean, how do you sort of see, you know, urbanization from a, from a global perspective, you know, and how are you able to sort of take off um advantage I guess of opportunities, both in terms of those countries where there is urbanization taking place and also in those countries where there is some move towards sort of the urbanization. Yeah, Michael, you're you're spot on and that there's kind of a divergence depending on, you know, we could draw a straight line to say, developed markets, emerging markets, that's not actually react, but it's, you know, roughly approximate in that, you know, for globalization in our portfolio were benefiting from, you know, that especially with an emerging markets, certain trends like ride sharing these trends benefit as more people come closer together and can use more shared infrastructure. But within our portfolio we've actually had a smaller theme that is US centric. Most of our themes are global in nature, but we've had a US centric theme that we are under supplied for housing in the US and have been since the global, since the global housing crisis, you know, more than 10 years ago now, we've been under supplied and we have millennials entering their household formation period and increasing demand. We've, that has had some exposure up to home improvement businesses like Lowe's and we've had some small exposure to homebuilders to capture this last year with the onset of covid. Exactly. To your point is, we've actually pivoted some of that homebuilder exposure to home builders that have land banks that are outside of major metropolitan areas across the East Coast because there are a lot of people who have said, you know, I work in new york city, there's no way I'm gonna drive three hours a day back and forth or commute three hours back and forth every day to new york. But they might be willing to do three hours of commuting two or three days a week if their family and can be in a nicer bigger house in a safer neighborhood and they can spend their time with their family like that. And that is that's absolutely happening everywhere. That's that's something that will be sticky from coronavirus as a behavior. I can vouch for the vaccines just for everybody on this call who's not in the same boat yet for vaccine penetration. It's shocking how quickly we're going to go back to not plexiglass and six ft of distance. We're going to go right back to the way things were. I've been amazed at how quickly this has changed but I will tell you that it's sticky that we're going to want to keep working remotely because it's just it's just better and people like the flexibility. That is something that will be persistent in our behavior. Okay thanks. That sort of conscious of how we're going from time. I mean I guess you can't have a any debate today without discussing E. S. G. So I'd be interested to sort of hear how, you know, both of your teams sort of approach it. Um Corina, if I can start with you on that. Yeah, we we take S. G. From both risk and opportunity perspective and we take it from the materiality perspective. So that's how material, what extent of impact it will impact in terms of our earnings or that there would be any regulatory risk and team does have very strong. Uh Yes, she mindset as well. Um safer R. C. I. O. For his for 40 years. We never had exposure, for example, in Velika in Macau casinos and we don't have tobacco manufacturer etcetera. We also have a preference for private enterprises, mainly. We believe that the interests are more aligned with us as an investor now, in terms of approach, we also do our own proprietary research. So the analysts platform will also do the USG research and for all or each of the stocks that we do in that research, we actually have what we call that value. That is what we believe in the intrinsic value of the company. And for the year she considerations we were specifically mentioned whether we adjusted that value as a result of that and because of that value is used to guide the adding and training in terms of the ways of the stock to be holding the portfolio. So that's how we have the integrated process from there. And of course, um I would say the active engagement and proxy voting and in the portfolio construction process that we do not, you know, involved for invest in a specific company. So that's a very very much a four pillar approach that we utilize by the ancient team. Yeah, okay. And great. It rhymes quite closely in that. Our strategy is E. S. G. Integrated and how we think about um environmental, social and governance, particularly from a financial risk potentially to the businesses outcomes. Um Just the same way that we look at all fundamental risks that surround businesses were basically doing fundamental research. We're engaging with the company management team to understand what their social risks. Um you know, did they have data at risk with the relationships with with labor and how do they how do they engage with those teams? What are their plans for environmental risks? We ask ourselves, what's the impact, both directly and indirectly on the environment? And then we go to management, we asked them how they view those risks and how they're looking at the environment and what their plans for remediation from a governance perspective, you know, were quite active in voting proxies specifically towards alignment of management interests and aligning toward shareholder value creation. And then as an independent check on ourselves because we're doing all this from kind of our fundamental research perspective of just naturally wanting to become experts on every stock we look at and look at every possible thing that could go right or wrong with it as an independent check. We also use investors proprietary S. G. Until research, which basically is looking, it's aggregating data from all other sources as well and all these other views of the stock so we can see if there's anything else that our research missed that basically the company may look attractive or less attractive on that. We need to double back in and then we build on that in just similarly into our evaluation analysis to make sure that all the risks to a value creation, opportunity for an investor and all the risks to the environment social, they're all embedded with an evaluation and then determine whether or not that's a positive risk reward opportunity for our investors. So it's it's an E. S. G. Integrated process. Okay, so my follow up question to this is, you know, you've got exposure to casinos and online gaming. So, you know, how did you sort of reconcile all that happy with what you just said? That? It's a great question and certainly topical. There are from a social perspective, there are certain behaviors that all of us on this conversation can agree with, like just harming Children is wrong, Human trafficking is wrong. These are these are global norms that that are acceptable everywhere. But in large part I think we find even, you know, within our own families and certainly when we start crossing geopolitical boundaries, there's not necessarily a social consensus on whether or not an activity is good or bad. That's a global norm across all all consumer basis. Um, and, and gambling is a great example. Gambling is an area where certain consumers are. Certain investors believe that's an activity that's not socially acceptable or that is socially destructive or it's not a, not a, not a positive and we should avoid that. But in actual behavior. Clearly, it's a welcome to pass time that's enjoyed by consumers around the world because it is a persistent behavior, um, that many of us look forward to as a vacation or a getaway or one time activity. Um, so our views is from an investment standpoint. Our view is not to make the determination on, on gambling where it's clearly a behavior that's happening and well liked by some and not by others. To determine whether or not the global norm applies, whether or not we should exclude that. It's clearly something that has a lot of momentum for us. The thing that has gotten this exciting there is it actually is becoming increasingly socially acceptable in a large part of the world, all of North America. Right now. It's moving to actually legalize formalized and create uh sports betting and online gambling as a new market. We're basically decades behind the rest of the world in this, A Supreme Court decision in mid 2018 was the impetus that actually allow the legalization of this. So what we're seeing is what has been uh an illegal or a gray market that's been under the table and unofficial and not accessible to people, is now actually being approved by state regulators, encouraged by state regulators, um Taxed, formalized, regulated, brought into the light and actually promoted now. And when you start to watch sports, you've seen this movie on tv as broadcasters are starting to move us towards talking at a low level about the game within the game. And just to summarize what we see is a market where we're actually on the verge of not only making socially acceptable in Canada and the U. S. The largest consumer market in the world. We're going to amplify it. We're gonna gamify it. We're going to put it on mobile phones in the hands of every consumer, give them access to digital concern currency. And we see a market that's actually going to grow at a 33% compound annual growth rate for the next decade. Our job is to understand and see where investors may give less access to capital or may punitive guys, some of these firms on a pe basis or they may they may be penalized, make sure that's embedded in evaluation. And as of right now we have some exposure and we maintain it to a reasonable size in the portfolio. But the risk reward opportunity for investors, um, even with embedding social concerns, certain investor base is significant for them right now. Okay. Thanks for that. So we need to sort of move on to the Q and a session. I'm going to first ask a poll question, which is a very general one around sort of investing in in in in themes, you know, which of the following Sort of things you most likely to invest in over the next 12 months and then there's a whole selection then if you could signal which one you like. Well then see what the, what the results, um, look like. Um, and nothing yet. This is a bit when I was sort of pull down on the poll questions was too hasty and looking for the answers. Well at the moment it's 100% in in technology which I guess that encompasses you know, some of those other mathematics as well doesn't as we discussed already, you know, consumption, health care, you know or both. Um sort of themes where technology is sort of ever ever present. And you know on that note, I will will go on to the sort of Q and a uh session and uh you've got a number of questions here. I mean the first one, I actually think it's particularly sort of topical um today, which is you know, one of the biggest risks or threat to some of these trends that are appearing. You know, and the question is, you know, how robust our these trends and how well placed are they to withstand sort of political risk and you know potentially the risk of sort of covid reemergence and you know, you know say when I say particularly topical, obviously we've had these sort of quite a lot of headlines being made by the controversy around you know the listing the I. P. O. Of DD the chinese company. So I'll love that in in your direction, Karina if I may 1st of all. Yes. Um Yeah definitely. I think the markets at the moment we're seeing some volatility in particular where the news last week and this week about for example you mentioned D D etcetera. That's on the outside of technology technology base. I think we should look at it very much from two perspective. The first is actually from the fundamentals and growth perspective that is how solid are those growth coming from the those areas. And I would arguably say that it's still very solid growth that coming from the areas driven by domestic consumption and facilitated hugely by the digitalization. Now, then of course the risks you mentioned about directly through the risk, what should we expect and to what extent, you know, we should see that impacting. I think we can take reference for 22 references first. I think locally we can take references for what we've seen from Alibaba. You write the invention, say earlier, Um that's impact about the antimonopoly regulations and the market generally expect that, you know, there is a find and when the fines actually came up you'll see that Alibaba actually rebound if I remember correctly around 6-7% on that day. So it is more moving on from that perspective. So that's a reference that we can take from a local perspective, of course did it this time is more true to related to, about the handling of the personal data privacy side, which I would say is something that would be a positive from the E S G perspective. And then from a global taken reference, I was set would be some of the larger internet names we see like amazon google etcetera, where I would say globally we're still seeing the authorities trying to to you know, examining what is the best way in terms of regulating on managing the internet space. So that is something what I want to say is not specific to china as versus very much receive globally. But I think something more specific to china probably would be the way in terms of the handling because the regulator comes in and said they're going to examine it and and then you the next few days in the D. D. Case you will see it is down for new users, not existing users down from from the apps. So I would say in terms of the speed um, of the implementation of some of that um, is actually raising actually said developed city in in the markets and some concerns. Whereas in more in the developed markets you probably have a longer period in terms of negotiating or discussion. So the market is very much more expecting them. But I will say one thing I want to say here is that share prices actually coming to evaluation is coming to a very attractive level. So balancing the positive I mentioned about the fundamentals in terms of growth and in terms of the record three side, which we don't feel that for it is intention or execution is to overdo it. I do feel that valuations comes to a very attractive level um, to, to look at these areas. And as opposed to show that, I would say a number of investors still positive on on the technology side. Okay, thanks. I'm Greg. How do you, how do you see the sort of the sort of threats? Are you concerned about those? I know in the U. S. You know, government has been trying to get after some of the big tech names for quite a long time, not having an awful lot of success, I might add. But how do you see see these threats, you fairly similar regulation is can impact any business no matter, you know, call attack or it can impact utilities and health care and can impact. Obviously we've seen in energy as well, all all of these can be impacted by regulation, the big tech companies whether or not they're actually in the tech sector or not. They're they're punching bags for every politician around the world right now and they're just the favorite favorite item to call out if somebody needs someone to blame. But the impact is on the evaluation. The difference between the U. S. And china with regulation is our chinese businesses, the chinese government when they decide that you have crossed the line or may be about to cross the line or could potentially cross the line and they're going to give you a fine. They tell you what the fine is and tell you what the rules are in a much more summary period of months uh and and which connect as a clearing event for those businesses as opposed to, you know, where we sit with, you know, regulation in the U. S. And and court trials that will take you know, on average three years and then possibly be appealed for another year after that. Okay, thanks. That um you know, the next question is you know sort of, you know, one revolves around the new economy versus old economy, you know listening to get impression those, you know very much focusing in these funds on new economy stocks rather than gold economy ones. Is that a fair assessment while there's still plenty of old economy opportunities out there Greg, you know, um for us, the old economy is are those things that we talked about and experiences? Um you know, it's a it's a restaurant, it's a regional casino. It's um it's going out in person to the movies. I mean these are these are old economy, they offer fantastic opportunities. You know, one area that's old economy that we think offers pent up demand For this reopening trade that we've positioned for is actually apparel because all of us, I'm sure spent the last 18 months, you know, working out like crazy in our home gym and we have a much thinner body type now than we did 18 months ago. Maybe someone like myself has a little bit different body type the other way and didn't exercise for the last 18 months, but we're about to go out in public, we're about to go to weddings, go to go back into the office, go to restaurants with friends again, and we may not need to buy like the same amount of clothes that we put by in an average year. We may need to buy an entirely new wardrobe. So that's, that's the kind of area where we think there's some kind of pent up demand, that would be an old economy example, but I should finish that punch line by saying by and large, the majority of our portfolio is very much driven by disruption. Increasingly digital, increasingly healthier lifestyles um kind of using demographics and those are not necessarily old economy areas that we're focused on. Okay. And what about you, Karina? Yeah, I would say the portfolio definitely position for the theater and it really depends how we define all the new economy. As I mentioned earlier, we see for example, digitalization more as a medium reaching to a lot of the underlying industry. So our portfolio, we do position in the number of various I've mentioned earlier at website on the passenger car. So that's taping on the demand for the passenger car. Um, E commerce companies during the food delivery. We have computer games, we have entertainment doing the videos like netflix equivalent in ASia that we have. And on the healthcare side I mentioned going online to see your doctor but in fact we do have exposure for example in companies that's doing the single usage for example um manufacturing syringe which benefits quite a lot um as a result of the vaccination, medical equipment that do the minimally invasive surgery. So those are the exposure that we have in the portfolio. I would say those are very much position for the future. And when you say oh economies, I mean I can say we have relatively less in terms of financials, we used to have more but increasingly we have I would say more and more opportunities that's coming in. So we definitely we don't have very little in terms of financials, we have no in terms of energy materials is not part of domestic consumption um as as we considered and also we basically see better growth that and similar to Greg, we do have traditional so for example a bakery cafe that is gained writing on the lifestyle and also a physical store where you want to get there and have a coffee and cheesecake with your friends when the economy or the knockdown finishes. And of course for a bakery cafe against you got take away as well, so you kind of benefiting both. So we have been also positioning into um say for example restaurants like bakery cafe etcetera in the portfolio and that arguably we can't put it in the in the old economy but I would say in brief um I would say the whole portfolio, we intend to very much position for the future growth. Okay thanks very much. I think that's a good time to sort of wrap up. We haven't got any more questions. I think the sort of underlying sort of messages coming loud and clear to me from listening to what Karina and Greg is saying is that there are, you know, in the, in the current environment, you know, whole sort of smorgasbord of opportunities out there in the consumer space. In fact, there are probably almost too many opportunities in a world of sort of sort of sort of disruption and you know, a world that is ever changing. So I hope you find you'll find this cool use for it. And he goes for me to thank both Karina and Greg very much for giving up their valuable time and wish you all are going to rest of the week. Thank you very much. Thank you everyone have a great day.

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