Capturing the value of disruptive growth with Schroders’ Global Disruption strategy

Disruption is everywhere and affects all aspects of modern life. The exponential growth of the tech power is one of the most powerful drivers of disruption. On average, every two years the capacity of semiconductors, computer memory and bandwidth doubles. This allows for the rise of new services and products, that impact almost every aspect of our daily lives. As such, disruption also a source for all kinds of new investment opportunities. Markets are often slow to recognize genuine disruptive innovation. As a result, the profit growth of truly disruptive companies in the longer run is much higher than market consensus. Just like the impact of the growth of these companies impacts the incumbents much more than markets are willing to accept.

Disruption transcends industries

The impact of disruption is not restricted to one of a couple of sectors or companies. It often transcends industries, explains Gavin Marriott – Product Manager for Global and International Equities at Schroders: “We have identified nine themes where disruption has the biggest impact, such as fintech, digitalization and e-commerce. While fintech was already getting a lot of attention as a result of the fast growing popularity of digital payments, the pandemic has accelerated the pace of growth in other themes. Healthcare is a good example. The industry is traditional, and quite slow to adapt to innovation. But the Covid-virus has sped up the design and deliverance of vaccines. Another disruptive shift is the rise of the digital doctor. Patients have experienced the ease of digital consults. The better patient experience has made the digital doctor more sought after than a visit to the general practitioner.”  

A roadmap to discovering winning companies

Disruption can take a different form in each industry or within themes. Instead of a fixed approach, Schroders uses a roadmap to discovering winning companies across the value chain. This starts with analyzing the companies that are the source of disruptive innovation. In addition there are also investment opportunities to be found among enabling companies, that are the conduit for change. The same goes for adaptors: companies that respond positively to disruptive change. However, investors should avoid incumbents that are losing ground and are to slow in reacting to a changing world.

This approach is as clear-cut as it is dynamic explains Marriott: “Tesla has been the disruptor in the auto-industry. But now the disruptor is being disrupted, as competitors are quickly scaling up the production of electronic vehicles. One of those companies is Ford, which has upped the EV-investments and expects 40 percent of global vehicle volume to be fully electric by 2030. As a result, Ford has shifted from a disruption-denier to an adaptor. These shifts are happening across al kinds of different themes: from the development of DNA/RNA-based medicines to cloud and cyber-security and from the fintech evolution to supply chain management. As an actively managed portfolio, Schroders Global Disruption strategy offers investors access to multiple disruption themes that are playing out all over the world.”



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