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Thematic Funds

Thematic investing refers to strategies through which investors can invest in megatrends, capturing opportunities arising from structural changes in society that transcend economic cycles. In other words, thematic investing is about transforming megatrends into investment opportunities.

  • 16

    Investment themes

  • 35

    Funds on offer

  • 1.5

    €bn under management

1. A new dimension in portfolio construction

Thematic investment transcends asset, sector, regional and style classifications, but without being totally independent of them, and takes account of the megatrends shaping society: demographics, social changes, resource scarcity, technological progress, environmental impact, etc.

Thematic investment transcends asset, sector, regional and style classifications.

2. Increased portfolio efficiency and diversification vs. global indices

The fact that the investment universe of thematic funds is usually narrower than that of conventional global equity funds could entail a higher specific risk. However, their specific nature usually results in low overlap with global equity funds, which improves the diversification and efficiency of the portfolio in aggregate.

Increased portfolio efficiency and diversification vs. global indices

Unconstrained approach 
These funds usually have no benchmark index associated with portfolio construction and mostly use the MSCI ACWI global index only for performance comparison purposes.

Looking beyond global indices 
Thematic funds generally have a low overlap with global equity indices; in many cases, this is because they do not have a clear index to benchmark against; in other cases, because the index is not fully representative.

3. Faster revenue growth versus global equities

In recent years, revenues of companies in the thematic universe have increased faster and more steadily than those of other listed equities. One way to look at this is to take the revenue growth of companies in the thematic universe (equally weighted) over multiple business cycles and then examine the standard deviation of this growth over time.

4. Beyond the focus on "growth"

The thematic approach examines structural trends spanning all sectors and selects companies that are exposed to them and can, therefore, benefit from this extra long-term growth. However, though most funds in the thematic universe are biased towards growth, this is not a specific factor that defines thematic investing since themes can be relevant to companies at all stages of their business cycle. 

5. A complement to industry funds

Thematic funds also provide a degree of diversification when compared with conventional industry funds. As an example, we analyse one thematic fund that we identified internally in our universe with the greatest exposure to a single sector: Robeco New World Financials. We see that its portfolio differs significantly not only from the relevant world index (MSCI AC World Financials) but also from the sector funds in the same Morningstar equity category (Financial Services), which translates into an increase in the diversification of the portfolio in aggregate.

6. Thematic investment as a way to increase portfolio sustainability

Many of thematic investment strategies are also vehicles that contribute to increasing sustainability by providing solutions to specific social and environmental challenges. This is evident in the case of a fund that invests in renewable energy, for example. However, it is worth clarifying that sustainability doesn't hinge only on environmental issues: social issues such as health, education and gender equality are also important.

The Sustainable Development Goals (SDG) provide a framework for investing in the key issues of the sustainability agenda. As a result, many thematic funds are aligned with specific social and/or environmental objectives, going beyond whether the companies in which they invest are managed on the basis of ESG (Social, Environmental and Governance) criteria.

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