Pandemic-induced changes create both investment opportunities and risks, a recent study finds.

By Ed McCarthy

COVID-19 has widely disrupted economies and markets in 2020. But what are the longer term considerations that pension fund managers should pay most attention to?

CPP Investments portfolio managers Caitlin Walsh and Ruby Grewal discuss these very issues in their recent report, “How COVID-19 Is Shaping the Landscape for Long-Term Investors.”

In it, they conclude that while some pandemic-induced changes will be temporary, other effects will be long-lasting and highly influential on investment opportunities.

The authors focus on four primary trends:

  • Consumer behavior
  • Health care and privacy policy
  • Cities and infrastructure
  • Supply chains

Consumer Behavior

Home confinement during the pandemic’s early stages and the potential health risk of shopping at stores boosted e-commerce but the authors note that the growth spurt has not been uniform. Also, large operations like Amazon and Walmart have scale and delivery advantages that smaller retailers can’t match.

Online grocery shopping grew strongly but shopper surveys indicate dissatisfaction with the services. Consequently, increased online grocery shopping may not be a permanent shift.

Certain demographic differences are another factor. Older consumers plan to stick with e-commerce to mitigate health risks, while younger shoppers express more interest in returning to stores.

Health Care and Privacy Policies

COVID-19 has increased the use of telemedicine. The authors note that although only 20% of the population they considered had tried the services, one-third of those users tried it for the first time during the virus. Patient satisfaction levels have varied globally, however.

“Contact tracing” became a new buzzword but concern over sharing personal health data with companies and governments emerged as an important trend. The degree of concern varied, with consumers in the West expressing greater reluctance than those in China and India.

Cities and Infrastructure

Remote work has grown dramatically worldwide and in Canada, where an estimated 40% of workers were teleworking as of late March 2020. The new arrangements appear to be working satisfactorily, and the report mentions that several large organizations like the Bank of Montreal and Tata Consultancy Services have developed plans to increase telework.

This shift could lead to flexible schedules that combine at-home and in-the-office work. The authors suggest that several industries could benefit from these new arrangements, such as collaboration and productivity services and cloud providers, among others.

Increased remote work could also influence office real estate markets: “With greater geographic flexibility in employment, employees looking for more space and fewer crowds will migrate farther from the city center. This is likely to accelerate the ongoing growth of Tier 2 cities in the U.S. and Europe.”

Supply Chains

Supply chain disruptions have led companies to review where they produce and source components and products. Global supply chains are likely to become more complex, benefiting developers of supply chain software and automation.

For health care companies, the disruptions could also lead to a greater emphasis on supply chain independence through more domestic sourcing.

Ed McCarthy is a longtime financial writer and author of three books, including “Foundations of Computational Finance with MATLAB.”