Global Equities
The new economy: Discovering growth and innovation in a changing world
Andy Budden
Investment Director
  • Globalisation is changing shape. The COVID-19 crisis accelerated the speed of the digital transformation and the rewiring of the global economy. 
  • The long-term outlook for new economy companies is robust, while old economy firms have the ability to innovate. 
  • Capital Group’s New Economy strategy1 has long-term exposure to companies at the forefront of technological advancements. Deep, fundamental research has allowed us to discover hidden “gems” before they become mega-caps.

Investors have raised concerns about risks in the global markets, particularly about deglobalisation given the prolonged trade tensions between the US and China. What is your view on that?

It may be tempting to view the trade friction between the US and China as a deglobalisation trend, but the current situation should instead be regarded as globalisation changing shape. What I see is the creation of a new market environment where the best companies position themselves to be the global champions of tomorrow. 

For example, we have already seen TSMC (Taiwan Semiconductor Manufacturing Company) beginning to position itself for the new world with the announcement of a new chip fabrication facility in Arizona. Other companies will also benefit as the high-tech infrastructure builds up around TSMC’s semiconductor ecosystem. 

There will be winners and losers in this process. And the job of an active investment manager is to identify and invest in the winners.


Will there be a greater divergence between the growth potential of new economy companies and that of old economy companies in this new world? 

I think the long-term outlook for new economy companies is very strong despite the volatility in the current market environment. 

Although digital transformation was already well underway for most of the past decade, the COVID-19 crisis has accelerated the speed of the transformation and the rewiring of the global economy in many areas such as e-commerce, digital payments, entertainment and cloud computing.

One of the concerns investors have recently raised is the increased risks given the strong run in new economy stocks. However, there are growth opportunities that are still largely untapped. For instance, the global IT spending for this year was forecasted to be around US$2.3 trillion.2 And we expect a significant portion of the spending to go to Infrastructure as a Service (IaaS).3 However, the spending on the global IaaS and related PaaS (Platform as a Service)4 market last year was estimated to be around US$88 billion5, which is only a fraction of the projected IT spending in the world. 

While old economy companies may not have the kind of growth potential that new economy companies do, one should not neglect the fact that firms in the old economy can have attractive valuations, high dividend payouts, and also the ability to innovate.


Could you give some examples of New Economy’s investment exposure to innovation? 

Capital Group New Economy Fund (LUX) has select exposure to companies at the forefront of technological advancements. It is a fund that is designed to capture growth and innovation in an evolving world. 

One of the areas we are looking at is the potential in 5G, which is expected to lead to a flood of innovations across industries.



1. Capital Group New Economy strategy, launched in December 1983 in the US, is now available as a Luxembourg-domiciled UCITS fund to investors in Asia and Europe. Both are managed by the same experienced investment team and share the same investment objectives. Capital Group New Economy Fund (LUX) was launched on 7 November 2019.

2. Data as at 4 May 2020. Source: International Data Corporation.

3. IaaS is a form of cloud computing that provides virtualised computing resources over the internet. In an IaaS model, a cloud provider hosts the infrastructure components traditionally present in an on-premises data centre, including servers, storage and networking hardware.

4. PaaS is a category of cloud computing services that provides a platform allowing customers to develop, run, and manage applications without the complexity of building and maintaining the infrastructure typically associated with developing and launching an app.

5. Data as at 2 March 2020. Source: Statista.


Risk factors you should consider before investing:

  • This material is not intended to provide investment advice or be considered a personal recommendation.
  • The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment.
  • Past results are not a guide to future results.
  • The Prospectus – together with any locally-required offering documentation – set out risks, which, depending on the fund, may include risks associated with investing in fixed income, emerging markets and/or high-yield securities; emerging markets are volatile and may suffer from liquidity problems.

Andy Budden is an Investment Director at Capital Group. He has 30 years of investment industry experience and has been with Capital Group for 19 years. Earlier in his career at Capital, he was an investment specialist. Prior to joining Capital, he worked at Watson Wyatt Investment Consulting. He holds both a master’s degree and a bachelor’s degree in engineering from the University of Cambridge. He is an associate member of the Institute of Actuaries. Andy is based in Singapore.


Past results are not a guarantee of future results. The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment. This information is not intended to provide investment, tax or other advice, or to be a solicitation to buy or sell any securities.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. All information is as at the date indicated unless otherwise stated. Some information may have been obtained from third parties, and as such the reliability of that information is not guaranteed.