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February 2017

Digital disruption: investing in a tech-dominated world

The digitisation of the economy promises to open up new avenues for investment.

The global economy has historically relied on two engines to power its expansion: an increase in the size of its labour force and improvements in workers’ productivity. Mostly, the two have hummed along in unison. But there have been times when one motor has spluttered, leaving the other to take the strain. Over the next 10 years, with many large countries in both the developed and developing world expected to witness a decline in their working age populations, we may need to get used to the idea of an economy flying on one engine. That needn’t be a problem, though – productivity should get a strong shot in the arm from a technological revolution. 

That the technology industry is witnessing a period of rapid progress similar to that of the 1990s is not in doubt. 

Not only are microprocessors becoming faster and cheaper to produce, in keeping with Moore’s Law, but the breadth of computer networks is also expanding at an exponential rate. What’s more, computing and data storage are becoming much more energy efficient: the amount of electricity required for a fixed computational load, for example, has halved every 18 months.  

This collision of technological megatrends is good news for the economy. Experience shows that bursts of technological development tend to be followed by a long-lasting improvement in productivity. Tech-related innovation has historically accounted for around 50 per cent of GDP growth in OECD countries over the past 20 years.1  

Such change means that businesses of all stripes are braced for upheaval. 

A recent survey from the consultancy Accenture found that almost nine in 10 chief executives expect their industries to change at an unprecedented rate in the next three years because of technological progress.

For investors, though, this is good news: when disruption hits, investment opportunities abound.  

Indeed, the last few years have seen the emergence of a new breed of disruptive companies that have transformed innovative ideas into a sustainable source of profit growth. 

Harnessing technologies such as artificial intelligence, automation, sophisticated electronic sensors and 3-D printing, they have developed products, services and manufacturing processes that few would have imagined possible a decade ago.  
How investors can capitalise on technological disruption through Pictet Asset Management's thematic strategies
At Pictet Asset Management, our investment teams go to great lengths to understand the technological forces at play in our economy. In doing so, we are able to identify the companies equipped to thrive in this brave new world. 

Our Robotics, Digital and Security strategies are a testament to this approach – portfolios whose investments are powered by a combination of seven transformative technological trends.