Robots and the Middling Revolution (Part II)

Fri 28 Jul 2017

By Brian Dennehy

Access Level | public

Portfolio building


taj mahal

(Part 1

The Industrial Revolution created new social structures and the rise of “the middling sort”.  Increases in “free” time and surplus earnings enabled saving for the future and discretionary spending – entertainment, holidays, consumer goods etc.

These growing middle classes were a motor of mass development that engulfed the Western world, with the US at its centre in the 20th century.

The American Dream of the 20th century is now The Asian Dream of the 21st century.  And by 2050 it is reckoned that the Asian middle classes will drive two-thirds of global spending.

Stiff competition to meet the needs of the “middling” classes, both within Asia and beyond, will drive innovation and the adoption of new technologies such as robotics.

The Overlooked Opportunity

Asian stock markets used to be cheaper because of political and economic instability, and financial systems prone to crises. Now this is just as much the case in the West, arguably more so.

The widespread debt and demographic crises of the developed Western world do not exist in Asia (Japan being the obvious exception).

Yet Asian stock markets remain cheap, trading at a nigh-on 30% discount to the rest of the world. This doesn’t make sense.

The Last Great Income Source?

Asia isn’t just about growth, far from it. It is probably the best source for long term income in the world. A dividend culture has been well established for years, and the growth in income payouts will be driven by both the spending of the bulging middle classes and profit margins boosted by the adoption of new technology.

There is a relatively small number of funds. The Newton Asian Income fund has the longest track record of generating and growing income in Asia.

Pedigree Growth Funds

From the above analysis, the potential for growth investors goes without saying. The funds which are most consistent over longer periods are Schroder Asian Alpha Plus, Invesco Perpetual Asian and Baillie Gifford Pacific - they all also have momentum right now.

Don’t overlook more focussed opportunities. 

We have successfully recommended India for years (see update here).  Consider Jupiter India.

The Technology Angle

There is very exciting potential, but you aren’t going to find the next Microsoft or Amazon in the typical technology funds where these sorts of massive businesses dominate. 

We continue to recommend more broadly-based funds with a bias to technology, and are particularly attracted by smaller companies. For example, Liontrust UK Smaller Companies is unusual with about 40% in dynamic UK-based technology companies - this has exciting longer-term potential.


  • Don’t overlook the opportunity in Asia…
  • …both for growth and income investors.
  • There is great potential in smaller technology companies



Portfolio building


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