Thematic Investing: Capitalising on trends that change the world
Summary
Megatrends are identified as structural shifts that will change how we live, work and play for many years. Institutional investors can consider investing in the way the world is changing by building a portfolio around compelling themes derived from megatrends. This paper explains how thematic investing works.
|
Key takeaways Institutional investors can take advantage of investment opportunities arising from megatrends. However, megatrends themselves are too abstract to be directly investable. They have to be brokern down in an analysis process from megatrend (eg Urbanisation) to investment theme (eg Smart Cities) , and from there to be a “topic” (eg Electric Vehicles). By investing thematically, investors can cut across traditional geographic or sector boundaries and access to a broader set of companies (eg makers of electric vehicles around the world) that benefit from trend-driven changes. In addition, investors can align assets with specific areas they value or care most for the planet or the future such as Sustainability. To succeed in thematic investing, there are key elements to consider:
These areas need rigorous research and deeper insights on themes. Therefore, the suggested approach is an actively managed portfolio diversifying across multiple themes, that is, adopting new themes while old themes peak. |
