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NEWARK, N.J., Oct. 14, 2021 – Disruptive technology has a reputation as a giant killer, but the latest technological breakthroughs in the services sector will not bury all of today’s market leaders — they will lift some of these companies to greater heights, according to new research from PGIM, the $1.5 trillion global investment management business of Prudential Financial, Inc. (NYSE: PRU).
Services now represent three-quarters of the workforce in developed markets, two-thirds of global GDP and more than one-third of the typical institutional portfolio. PGIM’s report, Reshaping Services: The investment implications of technological disruption, examines how advances in cloud computing, artificial intelligence (AI), machine learning (ML) and big data are impacting three of the economy’s largest industries: healthcare, finance and logistics.
The report draws on the insights of over 70 investment professionals across PGIM’s fixed income, equity, real estate, private credit and alternatives managers — as well as leading academics, technologists, industry analysts and venture investors.
The key takeaway? Disruption in these industries — where infrastructure costs are high, client bases are sticky and regulations abound — will increase the dominance of technology-forward incumbents rather than leave the trail of destruction seen in retail and manufacturing.
“The COVID-19 pandemic accelerated the development and deployment of new technologies that are radically reshaping winners and losers across the services sector in both developed and emerging markets,” said Taimur Hyat, chief operating officer for PGIM. “At PGIM, we believe long-term investors can get ahead of this transformational phase in the services sector by actively positioning their portfolios to capture the investment opportunities and mitigate the risks from this impending wave of technology-driven disruption.”
Disruptors in financial services are expanding the accessible market for financial firms, but today’s leaders have the opportunity to widen their moat against upstart competitors.
Healthcare services has been a notorious laggard in adopting technology, but investors have huge opportunities to tap into a major shift in how healthcare is delivered and administered globally.
Transport and logistics are at the early stage for disruption — autonomous vehicles promise to be a major part of our transportation future; in logistics, optimization and efficiency are the focus.
“Importantly, the hype around innovations like blockchain and autonomous vehicles is way ahead of today’s investable reality. Not all these changes will happen tomorrow — and the long sunset will provide opportunities for investors who can identify the transitional opportunities,” Hyat said. “Companies that will benefit from the necessary build-out of next-generation infrastructure may be a source of hidden gems yet to be unearthed in this market.”
For more, visit the microsite for Reshaping Services: The investment implications of technological disruption, the latest in PGIM’s Megatrends series.
PGIM, the global asset management business of Prudential Financial, Inc. (NYSE: PRU), ranks among the top 10 largest asset managers in the world1 with approximately $1.5 trillion in assets under management as of June 30, 2021. With offices in 17 countries, PGIM’s businesses offer a range of investment solutions for retail and institutional investors around the world across a broad range of asset classes, including public fixed income, private fixed income, fundamental equity, quantitative equity, real estate and alternatives. For more information about PGIM, visit pgim.com.
Prudential Financial, Inc. (PFI) of the United States is not affiliated in any manner with Prudential plc, incorporated in the United Kingdom, or with Prudential Assurance Company, a subsidiary of M&G plc, incorporated in the United Kingdom. For more information please visit news.prudential.com.
1 Prudential Financial, Inc. (PFI) is the 10th largest investment manager (out of 477 firms surveyed) in terms of global assets under management based on Pensions & Investments’ Top Money Managers list published on May 31, 2021. This ranking represents global assets under management by PFI as of Dec. 31, 2020.