Identifying the megatrend drivers of returns

Private-market portfolios should be assessed through their exposure to four structural forces—decarbonisation, digitalisation, deglobalisation and demographics—rather than only through asset-class labels.

• L&G translates the four megatrends into 16 sub-trends, including clean energy generation versus grid upgrades, and scores major real-asset sectors on exposure and impact over a five-year horizon.
• The framework uses equal weights for the 16 sub-trends, with exposure scored from 1 to 5 and impact from +3 to -3 based on L&G’s judgement of each sector’s fundamentals and performance sensitivity.
• Energy-transition infrastructure—grids, renewables and storage—ranks strongest, while industrial real estate benefits from data centres, reshoring, urbanisation and e-commerce.
• Demographics support residential, social infrastructure and senior housing, whereas office and retail score lower and still represent 25–40% of private real estate; most real-asset sectors nevertheless score above MSCI ACWI.
• A high score indicates a structural tailwind, not guaranteed returns, because asset selection, execution, timing, luck and crowding also matter; poorly scoring sectors such as offices and retail may still offer selective value-add opportunities.

Takeaway: Investors can use the 4D framework to identify whether apparently diversified private-market strategies rely on the same structural driver, but it is an exposure-alignment tool rather than a standalone return forecast or allocation shortcut.