Why invest in the new Europe?

Investing in a digital Europe

The pandemic is accelerating the shift to a more digital world, forcing companies to adapt to thrive. Where are the potential winners?

Aug 17, 2020

10 minutes

The pandemic is accelerating the shift to a more digital world, forcing companies to adapt to thrive. Where are the potential winners?

The fast view

  • While the COVID-19 pandemic has not left Europe unscathed, lockdowns have accelerated existing trends from which a number of European companies will benefit.
  • We have witnessed the adoption of new ways of working and living, some of which look likely to persist over the long term.
  • This spells bad news for traditional retailers, property owners and companies slow to adjust, but presents opportunities for companies that can adapt and innovate.
  • The shift to digital is shown in the accelerated growth in online banking and digital payments, requiring a greater focus on cybersecurity as one example.
  • We believe that an active investment approach is better placed to identify the winners in the transformation to a greener and more digital post-COVID Europe.

A more ‘digital’ post COVID world emerges

The economic fallout from COVID-19 has prompted significant policy changes in Europe, encouraging a greater degree of co-operation on issues such as fiscal policy and banking reform that had previously eluded policymakers. It has also added impetus to the green agenda and, along with enforced ‘stay-at-home’ periods, accelerated existing trends towards greater online activity. We believe some companies will thrive in the new environment, while some incumbent businesses will struggle unless they adapt and innovate. In this third part of the ‘Why invest in the new Europe?’ series, we assess the potential beneficiaries and how the 4Factor approach aims to find them.

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Specific risks

Currency exchange: Changes in the relative values of different currencies may adversely affect the value of investments and any related income. Derivatives: The use of derivatives is not intended to increase the overall level of risk. However, the use of derivatives may still lead to large changes in value and includes the potential for large financial loss. A counterparty to a derivative transaction may fail to meet its obligations which may also lead to a financial loss. Equity investment: The value of equities (e.g. shares) and equity-related investments may vary according to company profits and future prospects as well as more general market factors. In the event of a company default (e.g. insolvency), the owners of their equity rank last in terms of any financial payment from that company. Geographic / Sector: Investments may be primarily concentrated in specific countries, geographical regions and/or industry sectors. This may mean that the resulting value may decrease whilst portfolios more broadly invested might grow.

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Authored by

Ken Hsia

Portfolio Manager

Rajeev Bahl

Assistant Portfolio Manager

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