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During 2020, an unprecedented year on the financial markets, thematic management demonstrated continued interest and obtained great results in the Silver Economy segment, with R-co Thematic Silver Plus, or in the family owned companies universe, with R-co Thematic Families Businesses, which marks the return of the small and mid-cap stocks performance vis-à-vis the large ones. Conversely, R-co Thematic Real Estate had a much more difficult time, after several successful years in the listed real estate segment. The outlook for 2021 on these long-term themes still remains promising, beyond the vagaries of the economy, amplified by the volatility of the financial markets.
The Silver Economy
The health crisis has heavily impacted the segments of the Silver Economy, exposed to the “discretionary” spending of seniors and highlighted the lack of resources in most healthcare systems. However, the crisis has uncovered its resilience and its high level of innovation, with the development and suppl of equipment intended for emergencies and the pharmaceutical industry, the design of diagnostic tests, or even vaccines based on breakthrough technologies in record time. Digitalisation, already at work in the Silver Economy, has also experienced incredible acceleration (telemedicine, remote monitoring, electronic medical records, etc.). The outcome of the US election turned out to be quite favourable for the pharmaceutical sector. In this context, the management of R-co Thematic Silver Plus exploited these trends proactively, reducing its exposure to the most cyclical segments (leisure, asset management/insurance, etc.), and strengthening its exposure to healthcare, in particular in medical equipment suppliers, testing, pharmacy or even dedicated technology.
The outlook for the Silver Economy is still very positive, against the backdrop of global demographic ageing. Healthcare systems, with weaknesses that have been brought to the fore, are expected to benefit from sustained investment. The introduction of vaccines, associated with testing campaigns, should allow for a gradual return to normal, especially for the most cyclical companies in the segment that have seen their valuations drop. At the same time, pharmaceutical groups should reap the fruits of their Research & Development efforts in 2021, in the absence of a noticeable “patent cliff”. As for seniors, a number of habits acquired during the epidemic should continue, resulting in new attractive investment opportunities for our portfolio management (home automation, digital, etc.)..
European listed real estate
The consequences of the health crisis over real estate markets have been more or less noticeable, depending on the asset class. On one end of the spectrum, we find hotels and retail businesses that have paid the heaviest price and, on the other, the residential, logistics and healthcare assets that have had very little impact. Offices are between these two extremes. This polarisation has resulted in very high valuation differences on the stock market, depending on the type of property and high volatility.
The gradual disappearance of the health crisis in 2021, following the announced arrival of vaccines, will naturally benefit the entire sector (which, moreover, still attracts investors in a context of low-interest rates), but it should above all allow to mitigate this polarisation phenomenon. The question is in what proportion.
Indeed, beyond the health crisis, structural changesare underway (e-commerce, teleworking, etc.) and the Covid-19 crisis could well only be a catalyst. In this context, it is particularly difficult to estimate the “new structural valuation” of asset classes, which depends on many factors (amplitude of the low point, investments required to reposition assets, the potential for future growth, etc.).
The 2021 positioning of R-co Thematic Real Estate should make it possible to benefit from the expected rebalancing between asset classes (40% of the fund is now exposed to sectors likely to experience an increase in value, against 20% at its lowest), while maintaining a conservative bias. ■
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Completed writing on 27 November 2020.
