NEWARK, New Jersey, October 14, 2021– (BUSINESS WIRE) – Disruptive technology has a reputation for being a giant killer, but the latest technological advances in the service industry will not bury all of today’s market leaders. research from PGIM, the $ 1.5 trillion global investment management firm of Prudential Financial, Inc. (NYSE: PRU).
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Taimur Hyat, COO, PGIM (Photo: Business Wire)
Services now represent three-quarters of the workforce in developed markets, two-thirds of global GDP and more than one-third of the typical institutional portfolio. PGIM’s report, Reshaping Services: The Investment Implications of Technology Disruption, examines how advancements in cloud computing, artificial intelligence (AI), machine learning (ML) and big data are impacting three of the largest industries in the economy: healthcare, finance and logistics.
The report draws on the insights of more than 70 investment professionals among managers of fixed income, equities, real estate, private credit and PGIM alternatives, as well as leading academics. , technologists, industry analysts and venture capitalists.
The key to take away? Disruption in these industries – where infrastructure costs are high, customer bases are sticky, and regulations abound – will increase the dominance of state-of-the-art incumbents rather than leaving a trail of destruction seen in the industry. retail and manufacturing.
“The COVID-19 pandemic has accelerated the development and deployment of new technologies that are radically reshaping the service industry winners and losers in developed and emerging markets,” said Taimur Hyat, chief operating officer of PGIM. “At PGIM, we believe long-term investors can anticipate this phase of transformation in the services industry by actively positioning their portfolios to seize investment opportunities and mitigate the risks of this impending wave of technological disruption. “
KEY RESULTS: THE FUTURE IS LIGHT IN FINANCIAL SERVICES
Financial services disruptors are widening the market for financial firms, but today’s executives have the opportunity to widen their gap against downcast competitors.
Neobanks are not a threat to large institutions. Neobanks in the United States and Europe offer great potential, but largely target unbanked and disengaged market segments rather than the major personal and corporate credit customers who are the bread and butter of consumer banks and established businesses.
Robo-advisers haven’t beaten traditional wealth managers. Conventional wisdom has hailed robo-advisers as a revolution about to transform wealth management. However, this revolution fizzled out as the early robo-consulting players lacked an extensive distribution network and found it virtually impossible to achieve profitability. Instead, incumbent wealth management companies have successfully incorporated automated models into their own businesses.
Investors should be prepared for regulatory backlash as it spills over to services. Regulatory and legal uncertainty is common in many aspects of innovative technologies, including data privacy, ESG and anti-money laundering. The regulatory environment around banking startups and payment platforms remains unstable.
MAIN RESULTS: HEALTH CARE BECOMES PERSONAL
Healthcare has been notoriously lagging behind in the adoption of the technology, but investors have huge opportunities to take advantage of a major shift in the way healthcare is delivered and administered at scale. global.
Small opportunity for “the winner takes it all”. Given the varied circumstances that patients face based on their geographic location, individual lifestyle, and health risks, healthcare innovators are unlikely to “change the world”. Instead, they find relevant niches to disrupt – and often with great success.
New technologies offer more personalized care. New wearable devices track heart rate, exercise levels and sleep patterns, giving patients and physicians a broader perspective on well-being. Advances in low-cost gene sequencing allow patients to make more personalized decisions about their health care. Meanwhile, the testing and diagnostic equipment needed for this transformation will also thrive.
KEY RESULTS: TRANSPORTATION AND LOGISTICS BECOME GREEN AND INDEPENDENT
Transportation and logistics are at an early stage of disruption – autonomous vehicles promise to be an important part of our transportation future; in logistics, optimization and efficiency are central concerns.
Automobiles will be greener, but gasoline engines will have a long sunset. Sales of electric vehicles (EVs) in many parts of the world are growing rapidly. But the huge stockpile of internal combustion engines (ICE) will have a very long sunset. In 2050, for example, while electric vehicles are expected to account for 60% of annual new car sales, the majority of cars on the road will still run on gasoline.
The adoption of the autonomous vehicle will not evolve in the same way everywhere. Autonomous trucking is expected to emerge first in the United States, which depends on long-haul trucking for the distribution and transportation of goods. But China, where fleets of autonomous robot taxis are already roaming the streets in elaborate trials, is likely to lead the way in self-driving cars.
The global transition to online shopping enables greener logistics. Today, distribution centers are increasingly powered by renewable energy with solar panels on their sprawling rooftops, while fuel cell forklifts and electric trucks replenish inventory in last mile warehouses for same day delivery.
“It’s important to note that the hype around innovations like blockchain and autonomous vehicles is way ahead of today’s investing reality. Not all of these changes will happen tomorrow – and along the way. Twilight will provide opportunities for investors who can identify transition opportunities, ”Hyat said. “The companies that will benefit from the necessary construction of next-generation infrastructure may be a source of hidden gems yet to be discovered in this market.”
To learn more, visit the microsite for Reshaping Services: The Investment Implications of a Technology Disruption, the latest in PGIM’s Megatrends series.
PGIM, the global asset management business of Prudential Financial, Inc. (NYSE: PRU), ranks among the world’s top 10 asset managers1 with approximately $ 1.5 trillion in assets under management as of June 30, 2021. With offices in 17 countries, PGIM’s business provides a range of investment solutions for retail and institutional investors worldwide across a broad spectrum asset classes, including public fixed income, private fixed income, fundamental equities, quantitative equities, real estate and alternatives. For more information on PGIM, visit pgim.com.
US Prudential Financial, Inc. (PFI) is not affiliated in any way with Prudential plc, incorporated in the UK, or Prudential Assurance Company, a subsidiary of M&G plc, incorporated in the UK. For more information, please visit news.prudential.com.
1 Prudential Financial, Inc. (PFI) is the 10th largest investment manager (out of 477 companies surveyed) in terms of global assets under management based on the Pensions & Investments list of top fund managers published on May 31 2021. This ranking represents the global assets under management by PFI as of 12/31/2020.
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