Thematic Investing Forum 2022
Contents
Thematic Investing Forum 2022 took place on . This blogpost summarizes a few of the points mentioned in the forum
Sponsored Q&A - Built to deliver: thematic equity portfolios
- What is an effective construction process for thematic equity portfolios? How has Pictet Asset Management refined and developed this approach over time?
- How can investors secure resilient returns from their equity investments via thematic strategies?
- As asset owners look to make an ‘impact’ with their allocations, how do thematic equity portfolios enable investors to achieve this? And what characteristics do these portfolios possess that make them more likely to foster change than conventional strategies that claim to integrate ESG principles?
- What megatrends underpin your preferred thematic equity strategies, and why?
- What is the potential for thematics to emerge as a mainstream investment style in the future?
Speakers and Moderator
- Marc-Olivier Buffle Head of Client Portfolio Managers & Research - Thematic Equities Pictet Asset Management
- Iain Bell, Asia Investor
Notes
- What is the process of thematic investing ?
- Mega trend framework that identifies that change the world in the decades to come.
- Identify the universe that gives exposure to the theme. Pick the best stocks that have potential for growth, return.
- Mixture of identifying a theme and then pick the stocks based on bottom up analysis. Classic fundamental research is used to pick the stocks
- Create a theme that outperforms the market over a longer run - last a decade or so
- Actively managing the themes itself.
- How do you change your assumption over the longer run ?
- Advisory boards that have Theme experts - academics, professors, CEO’s, who have been in the theme for 20 years, help the company identify the theme
- Mega trends preferred
- Focus on Health
- Water
- Challenge in identifying mega trends
- Not easy to find a trend that is long term but you might not find companies that you can invest
- Universe of 250 companies that capture various themes, various company types, various factors so that one can rotate across the selected universe
- 3 Years to launch robotics strategy
- Identified in 2011-2012 and were able to invest only in 2015
- Urbanization trend will continue for decades to come. 70% of people will be in cities as compared to today’s 30%
- Thematic investing has been successful over years - Why ?
- Very tangible as you can actively and tangibly feel the change happening. Example: water treatment technologies
Panel discussion - Managing megatrends: capturing new exposure
- What’s influencing your investment decisions and driving your allocations?
- Given the expected long-term impact of sweeping structural shifts in societies, economies and the physical environment, how do you prioritise the thematic investments you are making in the short term?
- In what ways will your current allocations to thematic strategies change over the next one to three years?
- What opportunities does ‘common prosperity’ in China create going forward?
- How do you balance the desire for diversification as a key driver of portfolio decisions with the target of uncorrelated returns and long-term capital growth?
Speakers and Moderator
- William Chan
- Muhamed Umar Johan Sidik
- Stefanus Ade Hadiwidjaja
- Andrew Crooke
Notes
- Stagflation remains a fear now
- Regulators are becoming pro-ESG
- Sustainable finance roadmap has been made available to Indonesian companies
- As an insurer, capital solvency risk is the main risk to be considered
- Focus of strategic and tactical allocation has not changed in the thematic investing era
- Indonesia Insurance company strategy
- Stop exposing to infra projects
- More exposure to green related projects
- Indonesia Investment authority
- Can be invested for 25 to 50 years
- Can invest in short term horizon such as 5 to 7 years
- Focus on key sectors that are meaningful for Indonesia
- Lot of investment in transportation infrastructure
- Digitalization
- Health care security for Indonesia
- Renewable energy
- Lot of fads around the themes - What is the most important consideration while
looking at a thematic fund ?
- Need to understand the details such as liquidity risk, regulation risk, solvency risk, ALM limit
- Insurers cannot invest more than 30% of the money in offshore funds
- Mutual Funds
- ETFs
- Focus return on risk charges
- Want to position INA as a source for smart capital
How index innovation is advancing with megatrends ?
- The role of megatrends and their impact on investment product development
- How is indexing evolving in gaining exposure to megatrends?
- What are some of the ways to capture 21st century sectors?
- Why is it important to find the right passive solution when implementing megatrend strategies?
Speakers and Moderator
- Jason Ye
Notes
- Four megatrends
- Disruptive technology
- Healthcare revolution
- Climate
- Aging demographics
- Thematic investing is the way to target mega trends.
- $1T dollars invested in thematic funds
- Passive - 300B in thematic funds. Europe dominates this trend
- 0.98% is management fee for active thematic funds whereas it is 0.46% is for passive thematic funds
- Variety of indices availability via S&P
- Thematic index construction has become very flexible
- Interesting slides that highlight metrics relevant to this space
- 25 driving forces have been defined as individual indices by S&P
Smart societies: investing in a digitised and automated future
- Where are the opportunities for automation in the “real” sector, such as food service, logistics, construction, etc?
- What investment opportunities come from implementing technologies to enhance these systems?
Speakers and Moderator
- James Wang
- Andrew Crooke
Notes
- Labor shortage has become important across every country
- Pitfalls to be aware of
- Robotic is interesting in the context of labor shortage.
- Have technical ability to understand the technology adoption
- Start from market - What is the market opportunity ?
- Professors might have the right skillset with respect to technology. But they might not give the a good perspective on market fit
- You don’t need to frontrun the trend. Invest the opportunities today and Invest in the opportunities tom when they become ripened
- Robotics is not taking away jobs, they are taking away job postings where there are no resources to do those jobs
- Cutting edge of robotics is still decades away from Artificial General intelligence
How are the technology megatrends becoming mainstream for investment strategies?
- How do we put capital towards the future of artificial intelligence?
- Can the blockchain trend produce robust outperformance?
- How is deep learning relevant to modern investment managers?
- How do these stack up compared with other megatrends?
Speakers and Moderator
- Arman Sahovic
Notes
- ETFs launching on themes are increasing
- Single theme indices to Multi megatrend theme index
- Metaverse index in FTSE
- Main mega trends
- Robotics and Automation
- AI
- Video gaming - uptick has tripled since pandemic
- Trends could be different but the constituents across trends have a massive intersection
- Bullish on cloud computing
- Hesitation among the investors to adopt Blockchain
- Investing in Blockchain as a theme
- Certainly lot more space to grow
- Might be apprehensive about cryptos but you might be bullish on the companies who are creating Blockchain infrastructures
- No traditional benchark in investing in Blockchain index
- Investing in cryptocurrencies is still connected with Blockchain trend
- ETFs based on sentiment on Blockchain megatrend
- Tech mega trend
How to execute investment themes within multi-asset class portfolios ?
- How to identify scalable themes with a three-year+ duration
- Finding the best risk-adjusted returns across different asset class expressions of the themes
- Constructing robust portfolios using both core and diversifying themesTITLE
Speakers and Moderator
- Adam Watson
Notes
- Look for mega trends that are transformational.
- Endowment model has bought certain aspects of thematic investing in to the forefront
- Jan and Feb reading and understanding the themes published by asset managers
- Mega trends
- Sustainability
- Rise of Asia
- Tactical side
- Non cyclical
- Private markets to access excess returns
- Ability to move the assets dynamically will be important for an endowment model
- Themes should span across asset classes. If the theme has one asset class, then it might not be interesting
- Biotech is very attractive. The key is execution. The first way is via venture capital. Amount of companies listing in biotech is increasing.
- Take public markets approach rather than venture approach
- Private credit theme