Generation Y, aka Millennials, has surpassed Baby Boomers as the largest generation in history. Meanwhile, Generation Z is proving to be the most racially and ethnically diverse group ever.
As population footholds change, which generation holds the most spending power, and what goes on in the psyche of today’s consumers at large? In an episode of the Disruptive Forces podcast, Kevin McCarthy, senior research analyst and portfolio manager at Neuberger Berman, discussed with host Anu Rajakumar how this megatrend of consumer spending is changing the retail landscape.
McCarthy explained that while it may seem foreign for some to understand consumer behavior as a megatrend, it’s helpful to recognize the two pieces that make this demographic shift so compelling. The first of these parts is scale.
“There are two back-to-back Baby Boomer size generations coming into their peak spending years over the next decade and a half,” McCarthy said. “These generations will have purchasing power equating to, roughly, three times the overall population.”
The second piece is something called “behavioral cohesion.”
“These generations are the first digitally native cohort,” McCarthy added. “So, by default, they’re more connected, they’re more global, and they’re more diverse.”
The portfolio manager noted that Neuberger Berman’s goal is to understand what makes these consumers tick by watching non-commercial behaviors and then identify which companies are best positioned for market share gains over the longer term.
The Neuberger Berman Connected Consumer ETF ( NBCC) seeks to invest in companies that could benefit from Generations Y and Z being the dominant consumers. This includes companies that demonstrate significant growth potential from connectivity-based consumerism.
The fund spans a broad range of industries globally and may invest in companies of any market cap. The team will evaluate the web search and spending tendencies of millions of consumers and the daily call transcripts and filings of over 4,000 public companies to identify the opportunities that appear best positioned for mass adoption in the digital age.
NBCC is one of three actively managed ETFs Neuberger Berman launched in April. The ETFs are an extension of the firm’s thematic equity investment capabilities using traditional fundamental equity research along with alternative data capabilities and consideration of material environmental, social, and governance factors.
Joseph Amato, chief investment officer and president of Neuberger Berman, said in a news release that the new ETFs “deliver Neuberger Berman’s thematic equity expertise to a broad investor base.”
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