Constructing a portfolio of assets, chosen via a top-down process, to access benefits from specific medium- to long-term trends. Thematic investing is underpinned by the belief that economic, technological, demographic, cultural, political, environmental, social, and regulatory dynamics are key drivers of investment risk and return.
Identifying opportunities to access trends
Thematic investing enables investors to increase their investment exposure to a trend. A portfolio of assets selected for their connection to a trend will often have a risk–return profile that is different from a broad market index.
Some investors use thematic investing to access specific trends:
- they believe will shape the medium- to long-term trajectory of the economy and result in higher investment returns’
- to diversify their portfolio or hedge against specified economic risks; and/or
- to increase their association and involvement with a trend.
The focus is on forecasted trends and assets relevant to the trends. Trends tend to be medium to long term in duration, regional or global in scope, and cross-cutting with respect to traditional industry or sector boundaries. For example: climate change and the shift to a more circular economy. Thematic investing can be focused on a single trend or several related trends. For example, a thematic investor might simultaneously seek to gain exposure to assets that will benefit from an ageing population, increasing urbanisation, and population growth trends.
Thematic investing vs. thematic funds
Thematic investing (selecting assets to access specified trends) is not the same as a “thematic fund” (portfolio that is focused on a particular interest or area) – while thematic investment may often result in a focused portfolio, all focused portfolios are not the result of thematic investing. For example, investors may wish to invest in a portfolio of veteran-owned businesses because they want to support veterans while earning a financial return. However, this would not constitute thematic investing unless a case is made for how veteran-owned businesses enable access to a specified trend or trends.
Constructing a portfolio of assets, chosen via a top-down process, to access benefits from specific medium- to long-term trends. Thematic investing is underpinned by the belief that economic, technological, demographic, cultural, political, environmental, social, and regulatory dynamics are key drivers of investment risk and return.
Identifying opportunities to access trends
Thematic investing enables investors to increase their investment exposure to a trend. A portfolio of assets selected for their connection to a trend will often have a risk–return profile that is different from a broad market index.
Some investors use thematic investing to access specific trends:
- they believe will shape the medium- to long-term trajectory of the economy and result in higher investment returns’
- to diversify their portfolio or hedge against specified economic risks; and/or
- to increase their association and involvement with a trend.
The focus is on forecasted trends and assets relevant to the trends. Trends tend to be medium to long term in duration, regional or global in scope, and cross-cutting with respect to traditional industry or sector boundaries. For example: climate change and the shift to a more circular economy. Thematic investing can be focused on a single trend or several related trends. For example, a thematic investor might simultaneously seek to gain exposure to assets that will benefit from an ageing population, increasing urbanisation, and population growth trends.
Thematic investing vs. thematic funds
Thematic investing (selecting assets to access specified trends) is not the same as a “thematic fund” (portfolio that is focused on a particular interest or area) – while thematic investment may often result in a focused portfolio, all focused portfolios are not the result of thematic investing. For example, investors may wish to invest in a portfolio of veteran-owned businesses because they want to support veterans while earning a financial return. However, this would not constitute thematic investing unless a case is made for how veteran-owned businesses enable access to a specified trend or trends.
