Feature – Thematic investing
THEMATIC INVESTING: FUNDING THE FUTURE
The Covid pandemic enabled some investment trends to thrive. Among them, was thematic investing, which investors com- mitted to in massive numbers. Indeed, thematic assets under management worldwide exceed $800bn (£653bn) up from $255bn (£202.7bn) at the start of the pandemic, according to Morningstar.
Thematic investing is a grand title for a big idea, one which ultimately focuses on megatrends. It takes changes in society, applies them to an investment crystal ball and aims to make financial gain on those trends coming to fruition. “Megatrends are powerful, transformative forces that can change the trajectory of the global economy by shifting the pri- orities of societies, driving innovation and re-defining business models,” says Evy Hambro, global head of thematic and sector- based investing at BlackRock.
“They can have a meaningful impact, not just on how we live and how we spend money, but also on government policies and corporate strategies,” he adds. “Identifying the potential for structural change and investing in expected transformations early can be a key driver of successful investing. This may be an opportunity for investors to position their portfolios for long-term growth potential.”
42 | portfolio institutional | June 2022 | issue 114
In other words, investing in the future is key to securing their future. “Megatrends are long-term structural forces and we expect them to evolve over time. For instance, in 2016, the emerging global wealth megatrend primarily focused on China’s rise,” Hambro says. But since then, this wealth megatrend has expanded to incor- porate the emerging middle class in southeast Asia and other developing economies. “Rapid urbanisation has similarly incorporated the advent of smart cities and on-demand busi- ness models, along with infrastructure needed to support emerging megacities,” Hambro adds.
The pandemic influence As a style of investing, it left its mark during the pandemic, especially in focusing on particular themes. “The Covid pan- demic made our world suddenly need to become more digital, at the same time as substantial investments were made into life sciences and healthcare, which quickly increased the inter- est in these megatrends,” says Stephane Mattatia, head of the- matic indexes at MSCI.
In addition, the ubiquitous influence of ESG was apparent. “There was also an acceleration of the trend for people wanting
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