2024 And Beyond – Exploring Six Investment Megatrends With Tema ETFs

A recent report from Tema ETFs, a leader in active exchange-traded funds (ETFs), offers a window into six emerging long-term megatrends. Its analysis provides a detailed account of evolving sectors, technologies and potential investment opportunities in the future. Below are the details of the six long-term structural trends identified in its report.

Trend 1: Luxury Brand Market Evolution

According to Tema, the luxury market is evolving. LVMH's journey from a bankrupt textile conglomerate to a luxury empire under Bernard Arnault's leadership exemplifies this transformation. The strategy of acquiring and nurturing diverse luxury brands like Dior, Pucci and Fendi has been key to its success as one of the biggest companies in all of Europe. 

The company’s approach has helped reshape the luxury landscape, as seen in the U.S. with the formation of a $12 billion conglomerate through the merger of Tapestry Inc. TPR and Capri Holdings Ltd CPRI. This merger represents a strategic move to modernize and create a more aspirational luxury identity, encompassing iconic brands like Coach and Versace. Ultimately, this trend suggests that future investments in luxury brands will likely focus on conglomerates that successfully manage brand integrity while expanding globally.

Trend 2: Oncology Market Innovation

The second field Tema sees an emerging trend in is medical innovation in oncology. Merck & Company, Inc.’s MRK Keytruda and its role as a leading drug in immuno-oncology set a high benchmark, but the focus has now shifted to enhancing the immune system's ability to combat cancer with cutting-edge studies on TIGIT and LAG3 antibodies. 

These developments are poised to revolutionize cancer treatment by potentially extending the effectiveness of existing drugs like Keytruda and uncovering new therapeutic pathways. The advancements in immuno-oncology highlight a broader trend: a move toward more personalized and targeted cancer treatments, which could redefine how oncology is approached in the coming years. This shift is also expected to attract renewed investor interest, opening new avenues in cancer therapy research and development.

Trend 3: Royalties

The third trend is royalty financing, which Tema believes is emerging as a robust alternative investment stream across a variety of sectors. This trend is a response to the evolving financial landscape, where traditional financing methods are increasingly supplemented with new strategies. 

In music, entities like the Hipgnosis Song Fund Ltd. HPGSF are capitalizing on the lucrative nature of music royalties. Pharmaceutical companies, like Royalty Pharma, leverage this model to fund R&D, reflecting a strategic shift in how drug development is financed. Similarly, technology firms like ARM Holdings plc ARM exemplify how intellectual property can be monetized through royalties. 

This growing trend suggests a broader shift toward more flexible and creative financing solutions, potentially offering investors unique opportunities uncorrelated with traditional market movements.

Trend 4: Reshoring

The fourth trend is the movement toward reshoring as a strategic re-evaluation of global manufacturing. Driven by a thorough analysis of the total cost of ownership, companies are now recognizing the benefits of local production. This trend is fueled by factors like risk mitigation, supply chain resilience and a variety of geopolitical considerations. 

The shift is significant as it marks a departure from the previous emphasis on globalization and low-cost offshore production. As companies seek stability and efficiency, reshoring is becoming an integral part of their long-term strategic planning, likely to reshape the global manufacturing landscape in the coming years.

Trend 5: Monopolies And The Rise Of AI

The fifth trend is the rise of AI, which Tema sees as catalyzing a new era for monopolies, particularly in data-rich sectors. Companies like Moody’s Corporation MCO and S&P Global Inc. SPGI are harnessing their extensive data repositories while using AI to enhance their offerings and maintain market dominance. This trend signals a shift in competitive strategy, where the possession and smart utilization of data are key differentiators. 

The integration of AI also allows these companies to offer more refined and efficient services, potentially creating barriers for new entrants and solidifying their monopolistic positions. This evolving dynamic underscores the increasing value of data and AI in business models, shaping the future of information services and other data-driven industries.

Trend 6: Cardiovascular And Metabolic

Finally, the cardiometabolic sector is the sixth trend Tema sees at the cusp of a revolution propelled by advances in gene silencing and editing. Innovations by companies like Alnylam Pharmaceuticals, Inc. ALNY and Ionis Pharmaceuticals, Inc. IONS are pioneering treatments for complex diseases such as ATTR-CM and coronary heart disease. These developments signal a shift from traditional pharmaceutical approaches to more targeted and genetically-oriented therapies. 

This trend is about creating new treatments while redefining the approach to cardiovascular and metabolic diseases. These advancements could potentially offer more effective and personalized healthcare solutions, marking a significant evolution in the fight against some of the world's most prevalent health issues.

Tema ETFs Capitalize On These Insights

Consistent with the findings of this report, Tema has created six unique ETFs to provide investors the opportunity to align their portfolios with these transformative trends:

• LUX – This fund focuses on opportunities in the luxury market.
• CANC – This oncology ETF invests in the prevention and cure of cancer.
• ROYA – This fund focuses on companies with royalty revenue streams.
• RSHO – The focus of this fund is companies involved in the renaissance of American industrial manufacturing and onshoring.
• TOLL – TOLL focuses on companies operating in monopolistic and oligopolistic industry structures.
• HRTS – This fund invests in companies addressing cardiovascular and metabolic patient needs.

Learn more about Tema ETFs and how to invest in them on their website here.

Featured photo by Scott Graham from Unsplash.

This post contains sponsored content. This content is for informational purposes only and not intended to be investing advice.