When investment managers devise strategies for global thematic investment, they use the information they have gathered from investigating megatrends to create a thematic index. Thematic indexes are important tools in global thematic investing – but what exactly are they?
A thematic index is an investment index that tracks the performance of companies that are tied to specific investment themes. For example, a fund manager might set up an index to track the performance of companies that are tied to developments in the fintech sector, or that provide exposure to a particular economic group, or that have high exposure to 5G and other technological developments. The fund manager will start by identifying a trend or megatrend and then research the companies that are set to perform particularly well regarding that trend. These companies and assets will then form the basis for the index, which will track their performance to replicate and predict the performance of the trend as a whole.
Why is a thematic index important to investors?
Thematic investing is all about identifying specific long-term structural trends that will make for substantial economic growth, and thus, a good return on investments. Having identified these trends, it is important to have a means of tracking its progress and performance. In this way, thematic investment takes its next step from planning and research to actual investment. A thematic index is a tool that enables this transition. By tracking the performance of companies linked to the chosen theme, investors can target their investments accordingly and have a means of measuring their performance.
Nour Private Wealth (NPW) is a team of expert wealth advisors. Contact us for more information about thematic indexes and other tools at our disposal and how we can apply them to help you protect and grow your personal or family wealth.