Multi-Cap Growth – Four long-term growth trends to help defy UK uncertainty – December 2017

Making the right calls on short-term macro-economic themes and their impact on asset prices is notoriously difficult.

For those investing in UK equities, such calls have been made all the more difficult because of unpredictability around Brexit, a fragile government and the first moves to begin to normalise monetary policy.

However, identifying secular growth trends – established long-term structural growth themes fundamentally uncorrelated to the economic cycle – allows investors to take an alternative approach, one that is less reliant on the uncertain business of macroeconomic forecasting.

Market-leading UK companies operating in areas benefiting from secular growth trends should be well-positioned to grow regardless of the wider economic backdrop. This provides an attractive opportunity for the investor.


Technology is perhaps the most obvious structural growth area and indeed qualifies as a super trend, covering a whole series of sub-themes. One of these is the willingness of companies to invest heavily in IT to achieve a competitive edge.

Worldwide spending on IT is predicted to reach £2.8 trillion in 2018, up 4.3% from the estimated £2.7 trillion this year, according to research firm Gartner.

RELX Group is one UK business positioned to benefit. The company, formerly Reed Elsevier, provides huge quantities of professional information for scientists, doctors and lawyers and has moved from printed journals to highly searchable online databases. For example, lawyers can use its LexisNexis platform to search for case law in a variety of jurisdictions.

The company’s vast archives provide a competitive edge and act as a barrier to new entrants to the market.

Rise of the EM middle class

Asia already has more than 525 million people who can be termed middle class, more than the entire population of the European Union. And, according to Ernst & Young, over the next two decades the world’s middle-class will be swelled by another three billion people, coming almost entirely from emerging economies.

One company poised to reap the benefits is financial giant Prudential, which has a very strong presence in Asia. It sells products like pensions and health insurance, which are in demand from middle class savers in nations where state provision may not meet their needs. The company has excellent distribution and a well-established franchise across a broad spread of Asian countries.

Robotic automation

Robots already build everything from cars and computer chips to iPhone cases, and by 2021 sales of industrial robots will be growing at an average of 16% annually, according to ABI Research, which predicts a tripling of annual sales to £34 billion by 2025.

Renishaw is a high-specification engineering business which provides very accurate measurement and calibration tools vital in helping companies using industrial robots to avoid costly breaks in production. Given what is at stake, Renishaw’s track record in the field is greatly valued by its customers – and this deters new competition. The company also invests heavily to stay at the forefront of research and development.

Increased healthcare spend

Ageing populations, expensive new treatments and greater patient expectations are driving higher global spending on healthcare, which is projected to grow to £6.6 trillion by 2020, an increase of £1.3 trillion since 2015, according to Deloitte.

London-listed NMC Health is the largest provider of private healthcare services in the United Arab Emirates and is benefiting from a government push for companies to provide healthcare insurance for their staff. This is a highly profitable, fast-growing company that has been successfully acquiring smaller private hospital operators.

Finally, it is worth noting that these four trends are largely global in nature, which makes UK companies benefiting from them even more attractive, given the particular challenges faced by the domestic economy.

Richard Hallett, Manager of the Marlborough UK Multi-Cap Growth Fund.

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