Annual review and financial reports | The Pictet Group

Annual Review

To our clients, colleagues, communities and the companies we invest in.

Foreword by Renaud de Planta, former Managing Partner of the Pictet Group

Group reports for 2023

Megatrends are powerful socio-economic, environmental and technological forces that have the power to transform the investment landscape. They create opportunities for some, and risks for others. The digitalisation of the economy, rapid expansion of cities and depletion of natural resources are just some of the lasting trends transforming our world.

To be investible, a megatrend must show the potential to exert a lasting impact on large segments of the global economy — over a time horizon of at least 10 years.

A megatrend will be capable of spurring long-term growth and paving fresh avenues to business opportunities. Pictet has identified 21 megatrends, organised into six clusters.

Click on the graph to explore the trends.

Technology and science

Virtualisation and dematerialisation

Physical objects and analogue processes are being replaced with digital equivalents. This well-established megatrend has accelerated in recent years and will continue to affect a wide array of services.

Artificial intelligence (AI) and computing power

Physical objects and analogue processes are being replaced with digital equivalents. This well-established megatrend has accelerated in recent years and will continue to affect a wide array of services.

Greater interconnectedness

Demand continues for connectivity between people, and between objects on the “internet of things”. The result distorts physical distances and increases the need for greater reliability, speed and bandwidth.

Life sciences and applications

Biotechnology, genomics and neuroscience are among the fields that will be leading the way in advancing biological research and development.

New materials

Demand for high-quality and high-performance materials is relentless. And it does not end here — they must be affordable and environmentally-friendly.

Global governance

Geopolitical tensions

Major geopolitical rivalries are expected to increase as China ascends to superpower status. Meanwhile the US is, for the first time, finding its supremacy challenged.

(De) globalisation

Globalisation is no longer universal. It remains strong in culture and information, but has become cloudy in investment and travel. Despite this, social and economic interdependence continues to grow, but now through near-shoring and “friend-shoring”.

Environment

Environmental quality

Increasing pollution is negatively affecting health and wellbeing worldwide. The effects come at an economic as well as environmental cost. Environmental improvement and protection are growing priorities.

Climate change

Rising temperatures and sea levels, to name just two major concerns, are putting pressure on policymakers, individuals and businesses to limit greenhouse gas emissions and become resilient and sustainable.

Resource scarcity

Demand for energy, water and raw materials is putting stress on resources. The resulting scarcity is changing consumer behaviour, business decisions and policy choices.

Biodiversity and ecosystem services

The fast pace of biodiversity loss has been talked about as the “sixth mass extinction”. The costs, responsibilities and opportunities relating to ecosystem services and natural capital are becoming better understood.

Demography

Population growth and migration

The global population has quadrupled over the past 100 years. Growth in Europe and parts of Asia declined, with Africa accounting for the majority of this expansion. This shift has the potential to influence future migration.

Generational shifts

Shifts in societal power are influenced by technology, war and cohort size — baby boomers are the biggest generation ever seen. Younger generations are spending differently, prioritising the environment, inequality, and conflict.

Urbanisation

Employment opportunities, social benefits and services are leading to productivity differentials between rural and urban areas, especially in the developing world. between rural and urban areas, especially in the developing world.

Economy

Economic growth

Driven by increased productivity and marked by rising income per capita, this megatrend conceals the concurrent increase in wealth inequality. Subtrends include convergence of emerging markets and faster income growth among women.

Commercialisation

Implicit and hidden aspects of society are being increasingly monetised, transcending the conventional process of bringing new products to market.

Service economy

Several countries have shifted output away from agriculture and manufacturing, with a new focus on developing a service industry. This has significantly altered the focus of the global economy.

Specialisation and complexity

Economies are becoming more complex. This megatrend is driven by a diversification in activity and specialisation, often accompanied by demand for new services.

Society

Health

The world is seeing an increasing cultural focus on health. Interest in healthy lifestyles, preventive health, mental health and the prioritisation of public health is growing.

Growing disparities

Widening economic and social inequality looks likely to drive consumer and political behaviour, with the potential to contribute to growth differentials across various market segments.

Individualisation and empowerment

Societal focus is shifting away from the collective, in favour of individual needs and desires. Subtrends include a fading trust in established institutions and a tendency towards customisation.

Megatrends do not develop in a vacuum. Many of them, and their numerous consequences, are interconnected and mutually influential. For this reason, rather than analysing each individually, better clarity can be gained from a holistic view, thinking systematically to assess potential combined impacts. Pictet’s megatrend framework considers how these long-term trends interact with one another, and the entangled ways in which they influence the global economy - and in turn, the ways they influence investment decisions.

Population growth and migration

As populations grow, the world is undergoing a structural demographic transition. Particularly evident in developed economies — and increasingly in China — this kind of shift has a powerful impact on economies, welfare and health systems, and the environment. It affects individual countries in different ways, with marked differences between the US, Asia, and developing regions.

The outcomes can be both positive and negative. Medical advancements and improved nutrition both lead to longer and healthier lives. But the resulting ageing population demands greater pension reforms, when deficits are already significant. Meanwhile, demand for good quality nutrition increases pressure on food supply chains, healthcare systems, and welfare states.

In addition there is the influence on inflation. As populations age, the proportion of working-age people shrinks. In some countries this is also influenced by emigration. Tax revenues shrink alongside, making it ever more difficult for governments to meet needs without new sources of revenue. The lack of labour pushes up wages, maintaining inflation, and leading to a potential slowdown in economic growth.

Investors will need to understand the connections between these trends as they may require them to modify both tactical and strategic asset allocations.

Growing disparities
Health
Economic growth
Geopolitical tensions

Energy transition

The need to mitigate climate change is forcing a shift in the world's energy production and consumption, driving a transition from fossil-based to renewable and sustainable energy sources.

To this end, ever more ambitious commitments to reach net zero are being seen at both national and corporate levels.

Over the coming months and years, economic activity will need to become increasingly decoupled from CO₂, emissions, facilitated partly by technological progress, advancements in artificial intelligence and increased computing power.

Greener transport solutions will follow.

Policy will be the driving factor, with governments looking to assert and establish their energy independence, the need for which has been amplified by recent conflicts, geopolitical tensions and the effects of migration.

The private sector will adapt accordingly and direct capital towards innovations and technologies that enable the transition.

Climate change
Economic growth
AI and computing power
Health

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