The characteristics of thematic investment enable this investment methodology to complement traditional portfolio design and give investors an advantage. Although the exact nature of a thematic investment will differ depending on the theme in question, four general characteristics can be associated with thematic investing as a whole.
Secular trends
The first core characteristic of thematic investing is identifying and tracking long-term social, economic, and political trends. These broad developments, spanning all areas of politics and society worldwide, form the basis for thematic investing. A fund manager will begin by identifying and researching these trends deeply. They will provide the seed for a successful thematic investment portfolio.
Sector independence
Since thematic investing is focused on broad, overarching trends, it cuts across various sectors and asset classes. As a result, it is not dependent on developments within a specific sector. When building a portfolio, an investor will maintain a sharp focus on the trend itself and then look for sectors and companies exposed to that trend. This search could very easily take the investor or fund manager into an array of sectors that may appear to have very little to do with one another outside of the trend in question.
Focused on change
Thematic investments are focused on capturing trends that reflect how the world is changing, always with an eye towards the future, as opposed to the historical focus of other investment methodologies. This forward-looking approach means that the investor will always search for developments that promise radical, disruptive and long-lasting change.
Nour Private Wealth (NPW) is a team of wealth advisors based in Oakville, ON. For more information on the characteristics of thematic investments, as well as other tools at our disposal to help you protect and grow your wealth, contact us today.
