Yes, you’ve already missed Alpha, and as for millennials, they’re the oldies now. This new generation comes about just as the artificial intelligence (AI) revolution is getting started, with all the disruption that may bring to their working lives.
A number of characteristics are likely to define this generation, but first and foremost, they are likely to live a long time.
With advances in cancer and obesity care, girls born today are expected to live for over 90 years and boys for around 87 years, according to research from the Health Foundation. This is despite longevity expectations falling in response to the pandemic.
It means their working lives will be long, and this coincides with the advent of AI. Goldman Sachs suggests that up to two-thirds of occupations are exposed to some degree of automation by AI.
That’s not just factory workers or lorry drivers, but lawyers, healthcare workers and financial service professionals.
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Of course, it is possible that technology progression will finally deliver on its promise of greater leisure time, and that the next generation will enjoy a basic income from the state and be able to pursue enriching personal activities for much of their day. I’m not holding my breath.
More likely is that this generation will have to embrace life-long learning and be ready to switch careers at a moment’s notice.
Retirement consequences
There are also consequences for retirement. State retirement provision is likely to become increasingly unaffordable for Governments around the world. In the UK, retirement is already being pushed out towards 70 and beyond. This trend is likely to continue.
Rather than the 40 years in employment that most people have today, this may stretch out to 50 or 55. My advice? Make sure they pick a job (or several jobs) they like, because they’ll be doing it for some time.
This generation may not have the ‘trickle-down’ wealth experienced by millennials, handed down from their baby boomer parents who have got rich from gains in the housing market.
Millennials will almost certainly spend it on luxuries such as family homes and trying to retire before they are 90 (and the odd bit of avocado toast, of course) before they can pass it on to Betas.
If this all sounds a bit depressing, how can parents, grandparents, plus generous friends and relatives help these Betas through their lives?
There are all the usual investment housekeeping points that apply. Starting early is good to get the maximum bang from compounding. £200 per month invested at 5% per year could grow to over £500,000 by age 50 if you start the year they are born.
That will give them some considerable flexibility as they navigate the complex tech-enabled world in which they find themselves. Start just 10 years later, and that pot drops to just over £300,000. The early years are crucial.
While being invested is likely to prove more important than where you invest, certain investments may stand the test of time better than others. Betas will have a long time to ride out any volatility.
Funds such as the Sanlam Global Artificial Intelligence Fund are likely to be both future-proof and fast-growing as the AI revolution takes hold. Manager Chris Ford is also careful on valuations, ensuring investors don’t get caught up in the excitement of new technologies.
The relative strength of different economies will be tough to call. Will the US continue its dominance? Or will 2025 prove a peak for the world’s largest economy? It is certainly possible to see potential cracks – a large fiscal deficit, a dysfunctional administration, a huge equality gap. Will it be outsmarted by China? Or India? And to what extent will it thrive in a new era?
Go for global funds
For that reason, I’d go for global funds. Many of them have high weights in the US, but they also have the flexibility to move away if there are other interesting opportunities elsewhere.
Again, Betas will have a long time to invest, so a punchy growth fund is probably in order. Guinness Global Innovators, for example, looks to back companies making advances in areas such as healthcare, AI and big data, clean energy and sustainability, cloud computing, internet, media and entertainment, mobile technology and the Internet of Things, next-generation consumer, payments and fintech, plus robotics and automation.
IFSL Marlborough Global Innovation takes a similar approach but with earlier-stage businesses.
It may also be important to ensure that the world left for Generation Beta is worth living in, rather than being a fiery hellscape.
With this in mind, funds that keep sustainability in mind may also be a good choice. We like the CCLA Better World Global Equity Fund.
The Generation Betas born today will have a complex life ahead of them and will have to contend with issues alien to their parents and grandparents. A little head start may be more important for this generation than almost any other.
Juliet Schooling Latter is research director of FundCalibre and Chelsea Financial Services
