Investment Themes Such as Battery Technology and Future Mobility Are Being Hit by Market Disruption
December 12, 2022 — London
Risk-off approaches have caused discomfort among managers running high-growth-oriented strategies, including those operating thematic products, but most will continue to focus on developing such products
Prior to this year’s market volatility, funds exposed to megatrend investment themes such as battery technology, virtual reality, cloud computing, and future mobility had seen their assets under management grow healthily. However, such products have taken a backseat this year as investors contend with rising rates, falling markets, and other near-term headwinds, according to the latest issue of The Cerulli Edge―European Monthly Product Trends.
“Adverse conditions this year have seen funds investing in battery technology, electric vehicles (EVs), and other future mobility suffer double-digit losses, which have been compounded by investors’ selling behavior,” says Fabrizio Zumbo, director, European asset and wealth management research at Cerulli Associates. “This is, in part, because companies operating in the auto industry have come under pressure from rising battery costs, supply chain constraints, and tightening global fuel economy standards.”
Despite this, interest in EVs, connected infrastructure, and materials is not expected to subside. According to the International Energy Agency (IEA), EVs will represent more than 60% of vehicles sold globally by 2030, leading to increased demand for chargers to be installed in buildings. In response, HANetf launched the world’s first exchange-traded fund (ETF) targeting EV charging infrastructure earlier this year.
The auto industry will continue to attract attention as the urgency of climate change escalates. According to data from the IEA, global CO2 emissions from the transport sector rebounded after experiencing a dip during the first months of the coronavirus pandemic, growing by 8% in 2021.
Although investors are still concerned about growth, asset managers remain optimistic that strategies for investing in a future clean and connected world will attract investors in Europe over the long term. Many are still launching thematic products focused on these megatrends. The ETF issuers Cerulli surveyed believe that biotechnology, climate change, and battery technologies will be the three most in-demand ETF product themes over the next two years.
In addition, recent Cerulli research shows that asset managers plan to increase their environmental, social, and governance (ESG) marketing targeting low-carbon development over the next 12 to 24 months. Nearly 41% of managers will focus their ESG marketing efforts on energy efficiency and 39% include climate change and carbon emissions among their priorities.
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