Warning: members of the public are being contacted by people claiming to work for AXA Investment Managers UK Limited.  Find out more information and what to do by clicking here.

FinTech Strategy: Payment stocks exposed to the re-opening outperform pure “stay-at-home” stocks

  • 08 March 2021 (3 min read)

Key points

  • Tug-of-war between favorable economic re-opening newsflow and steepening yield curves
  • Vaccination campaigns accelerated, supporting the idea that the global economy should gradually re-open over the course of 2021
  • Results season, most fintech companies beat already high expectations

What’s happening?

The tug-of-war between favorable economic re-opening newsflow and steepening yield curves continued to drive global equity markets in February.

Global Covid-19 trends improved slightly in February in most countries, with the notable exception of Europe where new cases drifted higher (ex-UK), leading to further mobility restrictions. Vaccination campaigns accelerated in in the US and in the UK, supporting the idea that the global economy should gradually re-open over the course of 2021. In the meantime, economic activity continued to demonstrate a high degree of resilience globally. As a result of the improved economic outlook, inflation expectations increased significantly in February, shining a threatening light on extended global equity valuations. Very mindful of this potential threat to market stability, the US Federal reserve as well as the ECB both clearly indicated that they would maintain a very accommodative stance for the foreseeable future, thereby providing significant support to global equity markets.

Portfolio positioning and performance

The FinTech fund out-performed its performance benchmark in February. The main contributors to this positive performance were payment stocks that stand to benefit from a gradual re-opening of the economy, namely American Express, Global Payments, Fidelity National Info Service, Shift4Payments and StoneCo. As mentioned in last month’s report, the medium-term outlook for these businesses remains excellent.

Among the main negative contributors were Envestnet (ramp up of investments to take advantage of current market opportunities), Lufax Holdings (tighter Chinese regulation), Q2 holdings, Verisk and Experian (all strong but defensive businesses less directly exposed to an economic up-tick).*

In February we did not make any significant changes to the strategy. 

* Stock shown for illustrative purposes only and should not be considered as advice or a recommendation for an investment strategy.

Outlook

Covid-19 proved to be a significant tailwind for the fintech universe and investor interest in the space is close to an all-time high. The results’ season has continued to deliver strong results, with most of the companies active in the fintech universe beating already high expectations. Payment stocks particularly exposed to the re-opening of the economy, such as Amex, WEX or Shift4Payments, that derive a significant part of their revenues from business or retail travel and lodging payment flows, are starting to outperform pure “stay-at-home” stocks. 

Overall, we believe that the Fintech strategy is well positioned for the post Covid-19 world, with a strong focus on structurally growing businesses with solid balance sheets. The Fintech businesses the strategy invests in are through-the-cycle growers. They will undoubtedly represent a larger part of the global economy in 5 years, even more so in 10 years.

No assurance can be given that the FinTech Strategy will be successful. Investors can lose some or all of their capital invested. The FinTech strategy is subject to risks including Equity; Emerging Markets; Global Investments; Investments in small and/or micro capitalisation universe; Investments in specific sectors or asset classes; ESG.

Have our latest insights delivered straight to your inbox

SUBSCRIBE NOW
Subscribe to updates.

    Not for Retail distribution

    This document is intended exclusively for Professional, Institutional, Qualified or Wholesale Clients / Investors only, as defined by applicable local laws and regulation. Circulation must be restricted accordingly.

    This promotional communication does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

    Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee that forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

    Before making an investment, investors should read the relevant Prospectus and the Key Investor Information Document / scheme documents, which provide full product details including investment charges and risks. The information contained herein is not a substitute for those documents or for professional external advice.

    The products or strategies discussed in this document may not be registered nor available in your jurisdiction. Please check the countries of registration with the asset manager, or on the web site https://www.axa-im.com/en/registration-map, where a fund registration map is available. In particular units of the funds may not be offered, sold or delivered to U.S. Persons within the meaning of Regulation S of the U.S. Securities Act of 1933. The tax treatment relating to the holding, acquisition or disposal of shares or units in the fund depends on each investor’s tax status or treatment and may be subject to change. Any potential investor is strongly encouraged to seek advice from its own tax advisors.

    Past performance is not a guide to current or future performance, and any performance or return data displayed does not take into account commissions and costs incurred when issuing or redeeming units. The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. Exchange-rate fluctuations may also affect the value of their investment. Due to this and the initial charge that is usually made, an investment is not usually suitable as a short term holding.

    Risk Warning

    The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested. 

    Are you an IFA or other Professional Investor ?

    Are you a financial advisor, institutional, or other professional investor?

    This section is for professional investors only. You need to confirm that you have the required investment knowledge and experience to view this content. This includes understanding the risks associated with investment products, and any other required qualifications according to the rules of your jurisdiction.