Thematic investing is a top down investment approach that focuses on broad, macroeconomic themes or megatrends. Fund managers utilise these themes to identify strong companies to invest in.

Frances Hudson, strategist for multi-asset investing at Standard Life Investments, says: “It tends to be global and it can be multi-asset, although within wealth management it is primarily equities. The manager will pick things they think are important, so it might be the emergence of emerging markets, something changing about technology, or an aspect of the environment, such as water shortages.”

The megatrends that lead to solid investing themes are in the main global demographics such as dealing with an aging population, greater economic equality between men and women, a growing middle class and the income gap between those at the top and those at the bottom. They also include clean and renewable energy such as solar, wind and tidal; natural resource scarcity such as food, water and energy; climate change and disruptive technological innovation from robotics to genetics and automation.

“In a world where change is both constant and expected, there are basic, everlasting themes that will remain essential,” said Ashvin Chhabra, chief investment officer at Merrill Lynch Wealth Management.

Demography

As the world’s population increases in size and age, people’s needs change. The UN Population Division expects the world’s population to be 8.5 billion people by 2030. Healthcare costs rise overall because people get older and live longer. It is a trend that will continue and has huge investment potential if you implement the right investment strategies. Investment opportunities lie in a range of sectors, from pharmaceutical and healthcare to aged care and consumer products that elderly people use regularly such as food supplements, health monitoring devices and pain relief aids.

Energy

Companies have been investing in clean and renewable energy such as solar, wind and tidal for decades now. It makes good business sense for a number of reasons. The investments help reduce long term operating costs, diversify the energy supply as renewables are added to the supply side and hedge against the volatility in traditional fuel markets. It helps companies achieve greenhouse gas reduction goals laid down by governments and demonstrates good leadership and corporate responsibility, which builds trust in companies and makes them a more attractive investment.

As populations rise there is the obvious increased demand for energy, food and water which places greater pressure on finite global resources. The United Nations World Water Development Report 2014 predicts global energy demand to increase by a third in 2035. Most of the demand will come through China, India and the Middle East.

Digitalization

Technological innovation has seen industry sectors disrupted in ways that would be unimaginable in the past. The world’s largest taxi company, Uber doesn’t actually own any taxis. If Facebook were a country it would be the most populous nation on Earth. The increasing digitisation of our lives will continue to lead to disruptive technologies demanded by tech savvy consumers which creates constant opportunities for the early investor. There are a lot of tech startups popping up all over the world right now, being able to distinguish the ones with true value is key to making the right investment choices.

To find out more about how your brand can utilise thematic investing as part of your overall investment strategy, contact Cornfield & Partners at info@cornfieldpartners.com today
or call us on +44 (0) 20 7692 0873.

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