John Doe

The Pet & Animal Wellbeing Fund of Allianz Global Investors focuses on capturing long-term growth driven by the changing way people relate to animals. Pets are increasingly regarded as full-fledged family members, leading to structurally higher spending on healthcare, nutrition, and specialized services. Historically, these expenditures have been less sensitive to economic fluctuations than other forms of consumer spending, which means the theme remains relevant even in uncertain market conditions. This is according to Oleksandr Pidlubnyy, Senior Portfolio Manager at Allianz Global Investors.

Following the exceptional surge in pet adoptions during the COVID period, growth in the number of pets has normalized. In some segments, this temporarily resulted in slower revenue growth. Nevertheless, the global pet population remains clearly higher than before the pandemic. This larger existing base continues to generate sustained demand for animal healthcare, nutrition, and complementary services.

At the same time, higher inflation and weaker consumer confidence have put pressure on demand for more non-essential products, although the impact has been more limited than in other consumer sectors. In addition, companies in the industry have faced higher costs and staff shortages, particularly in veterinary and specialized care.

Positive outlook

Over the long term, the outlook remains positive. The number of pets worldwide continues to grow, and owners are spending more per animal. Preventive care, diagnostics, pharmaceuticals, and premium nutrition are playing an increasingly important role. Innovations in veterinary medicine — such as improved diagnostic techniques and new treatment methods — are expanding treatment options and enhancing the quality of care, mirroring developments previously seen in human healthcare. There is also significant geographic growth potential. In many emerging markets, standards of pet care are still relatively low, but rising incomes and changing norms are expected to further drive demand for better care and nutrition.

For investors, the Pet & Animal Wellbeing Fund offers an attractive addition to a portfolio. The fund invests in a mix of sectors such as healthcare, consumer staples, consumer discretionary goods, and to a lesser extent the financial sector, providing diversification and a relatively defensive profile. These sectors typically exhibit more stable demand and less earnings volatility, which can help make portfolios more resilient during periods of heightened market uncertainty. For investors already exposed to volatile growth themes such as technology or artificial intelligence, the pet economy can therefore serve as an effective diversifier.

Temporary headwinds

Although the strategy has lagged the broader equity market in recent years, this is largely attributable to temporary headwinds, higher interest rates, and investors’ strong focus on a limited number of popular growth themes. As a result, companies in the pet economy have fallen out of favor and are trading at lower valuations, despite continued growth in revenues and profits. It is precisely this combination of solid fundamentals and more attractive valuations that, in our view, makes the theme appealing for long-term investors.