Welcome to Morningstar. I'm Holly Black. With me is Laura Destribats. She is Manager of the Goldman
Sachs Global Millennials Equity Fund. Hello. Hi, Holly.
So, there's a bit of a clue in the name, but do you want to tell us what the fund does?
Yeah, of course. So, look, we launched the strategy five years ago and the impetus back then
was that we believed that millennials were on the cusp of becoming the world's most powerful
consumer force. So, with 2.3 billion millennials worldwide, they were entering the workforce,
looking to climb up the corporate ladder. And as a result, they were going to be the
generation driving growth in consumer spending over the next decade-plus.
Now, as we took a step back and thought about what made millennials different, we quickly realized
that they grew up during a time of immense technological innovation. They also came of age on
the back of the Global Financial Crisis. And so, this really gave rise to two things – one is the
growth of what we call tech-enabled consumption. So, as a result, we invest in areas like
e-commerce, social media, online entertainment and gaming. But then, also, a set of very different
priorities and behaviors. So, millennials are more focused on health and wellness. They
prioritize things like spending on experiences over material goods, and they have a heightened
focus on issues, including sustainability. So, those are some of the areas in which we invest.
And fundamentally, we believe that by looking to the next generation we'd be able to identify
the corporate winners of tomorrow and create a portfolio that would outperform markets.
So, how has the pandemic affected millennials? Because I can see that the tech-based firms,
what the millennials are buying, that's all good for the pandemic. They've really thrived,
but the experiences haven't really been possible. Yes. So, you're absolutely right. So,
I think if we take a step back and look at how the portfolio performed last year and
how the businesses that we're invested in have been impacted, I'd say that for the most part
you've seen actually an acceleration of a lot of the trends that we've been invested in. So,
think about the fact that at different points in time half the world's population was under
some form of lockdown that forced everyone to buy goods online for the first time. It forced
children to attend school online. It forced people of all ages to rely on the digital
economy to stay connected, to stay entertained and sane during this incredibly difficult period.
And so, most of the businesses that we're invested, I would say, saw an acceleration.
And then, some, you're right, like experiences would be a great example,
those obviously have been – experiences have been off limits for quite some time now, and so those
companies struggled and quite frankly, went through the toughest crisis that they've ever
undergone. But as we look forward to the future, which hopefully is brighter than the past,
you realize that actually we're very social beings, right? Humans
enjoy spending time together. I think we're all very much looking forward to the time
when it's going to be safe to do so. And so, those companies in that experiences space that
were able to survive through the pandemic because they had high-quality balance sheets are actually
going to be in a position where you're going to have a lot of pent-up demands for experiences and
a competitive landscape that likely is going to be more supportive as some of their peers may not
have survived through this difficult period. Yeah. So, if we think about, dare I say it,
post-lookdown life, where are some of the opportunities within that?
Yeah. So, look, I think, definitely experience is the big one, right? Like, I think we're all
looking forward to be able to get back outside and be able to spend time with our friends.
So, we're invested in companies that sell tickets to live events is one example.
We have exposure to the companies exposed to theme parks as another. And just people being able to
spend time together. So, also, think about indoor dining, et cetera, as another example. And then,
a few of the companies that we're invested in whilst they were in a way secular beneficiaries
of COVID. So, secular beneficiaries from the fact that people spent more time online, they still
have a big proportion of their revenues exposed to cyclicality. So, if you think about anything to
do with online advertising. Advertising itself is cyclical. When people are able to go back outside,
companies involved in the travel industry, as an example, will start to spend on advertising
again. And so, that will serve as a cyclical, et cetera, for some of these businesses.
So, a lot of the names within the millennials theme are quite sort of tech focused. So,
how do you keep the portfolio balanced and not just become another tech fund?
Yeah, great question. So, look, I think that whilst definitely as I said in the outset,
tech-enabled consumption is an area that we're focused on and invest in. But when you take a
step back and you think about the composition of the fund, it's not a tech fund, right? So,
we invest across all sectors, all geographies, all market caps. Actually, in the strict definition of
the IT sector, the fund is actually underweight. We're underweight FAANGs as an example. And so, we
really think very broadly about the ways in which this thematic is impacting millennials as a whole,
and we look for investment ideas across that entire landscape.
Laura, thank you so much for your time. For Morningstar, I'm Holly Black.