(The author is editor-at-large for finance and markets at
Reuters News. Any views expressed here are his own)
LONDON, Sept 25 (Reuters) - Tech, pharma, climate -- and now
In the race to pick mega-trends amplified by this year's
pandemic, education, or at least new technology within that
market, is being circled by asset managers seeking alternatives
to the already super-expensive tech and pharma sectors.
EdTech -- which has been growing since universities moved to
provide open-access Massive Open Online Courses, or MOOCs, more
than a decade ago -- is one sector expected to be supercharged
by the COVID-19 shock.
And the story goes well beyond emergency home-schooling and
online teaching during lockdowns.
In the past week alone, giant asset managers UBS Wealth
Management and Germany's DWS have built up EdTech investment
cases as a key part of what the UBS report rather grandly dubbed
the "Future of Humans".
The investment case centres on two areas of education whose
expansion the pandemic is expected to accelerate.
First is the private provision of tertiary or lifelong
training as governments struggle to keep funding rising demand,
mainly from developing countries. And second is a need for
career-long reskilling of workers due to disruptions wrought by
automation and digitisation of workplaces.
What has caught the eye of investors -- many of whom are
also involved in 'sustainable' investing, another emerging
mega-trend -- is the role of EdTech companies in developing
artificial intelligence and machine-learning technologies in
areas like e-classrooms, virtual reality or interactive modules.
Paul Buchwitz, portfolio manager at DWS Invest SDG Global
Equities, a fund that focuses on firms contributing to at least
one of the UN's Sustainable Development Goals, said a key
proposition is that EdTech is still only a tiny fraction of a
huge and growing education market overall.
Sydney-based industry research firm HolonIQ claims global
education and training expenditure overall will reach $10
trillion by 2030 from $6 trillion this year -- making it more
than $1 trillion bigger than the global auto industry by then.
It assumes the next 10 years will see an additional 800
million second-level and 350 million tertiary or higher
graduates -- largely in Asia and Africa -- and a need for 1.5
million additional teachers per year on average.
With that in mind, it estimates EdTech's share of global
education spending will rise from just 2.6 percent in 2018 to
4.4 percent in 2025.
"Although the majority of EdTech's technology has been
mature for years, it has so far only been used sparingly due to
the ignorance and inertia of many decision-makers and
omnipresent budget restrictions," wrote Buchwitz at DWS.
"The catalyst of the Coronavirus pandemic has fundamentally
changed the situation."
Investors' focus is mostly on adult learning.
"Education cannot be left to the public sector alone, and
this opens up investment potential in both public and private
markets," UBS's "Future of Humans" report said, identifying cost
as a huge factor. "We see opportunities in Edtech, ancillary
services, and companies that have a superior record than their
peers in training and developing their employees."
The report forecasts the overall education market will grow
at a "high-single-digit rate" over the next decade, with
private education expanding most rapidly.
"The market for e-learning, for-profit post-secondary
education, language learning, and test preparation should
experience a high-teens rate of growth," it said.
Many of the leading lights of EdTech are startups or still
private, often based in India, China and the United States. The
bigger firms have seen revenues balloon and are having little
trouble raising finance.
According to reports, the latest fundraising for India's
Byju, a Bengaluru-based startup offering a mobile app that
tutors children, values the firm at more than $11 billion.
China's online tutoring start-up Zuoyebang's latest funding
round valued it at more than $6 billion.
But listed firms have faced the full glare of the market.
China's GSX Techedu was a target for short sellers Muddy Waters
and Citron Research this year amid allegations -- repeatedly
denied -- about the accuracy of its customer base.
The company has said it is co-operating with a request for
details from the U.S. Securities and Exchange Commission.
And yet despite the allegations, the stock is still up
almost 400% year-to-date.
Exchange Traded Funds and indexes give a more measured
picture. The Foxberry HolonIQ Education Tech & Digital Learning
index -- on which some recent ETF launches were based -- is up
about 23% this year. Not quite Apple or the wider FAANGs but
better than the Nasdaq Composite's 18% or the flat S&P500.
Analysts at Citi say low tech adoption in education is due
to inertia and cost -- digital textbooks may not be expensive
but the Wifi network or reading devices might be.
But they added: "We think in the case of education,
COVID19-related 'necessity' will end up being the 'mother of
(By Mike Dolan, Twitter: @reutersMikeD
Editing by Catherine Evans)