Advantages Of Thematic Investing

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Thematic investing interview:
1. What are the advantages and main challenges of thematic investments? What about risks? How would you define “Thematic Investing”?

Thematic investing is a top-down investment approach with a focus on broad economic themes that an asset manager uses to identify specific investments.
Thematic investing is about picking ideas and turning these ideas into investments.
It is another way to invest, thematic asset managers don’t invest through a traditional bias such as value vs. growth, small cap vs. large cap companies and rather than looking at specific regions, sectors or markets, they make investments based on global opportunities. We believe that thematic investing is an efficient way to turn the broad analysis
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Structural themes are linked to a long-term analysis. Investing is always shaped by secular trends and these global mega-trends are opportunities for investors who can look many years ahead. The trends we are trying to identify are secular changes that will materialize over many years. As an investment process, thematic investing, has its positive and bad performances like all approaches, however it can be beneficial for investors with a long-term view, which is what investing is about.
Thematic investing carries some specific risks, the future is not necessarily a continuity of the past and the world is always disrupted by technologies and “black swan” events. Therefore, there is always a possibility that a theme does not materialize in line with expectations. To manage this risk, theme diversification is important. Choosing the winning theme is the cornerstone of thematic investing, however, investments are performed through listed companies and funds therefore there are risks coming from specific choices. Thematic investors need to identify the right companies in each theme, companies whose revenues are or will be influenced by the theme. Once these themes and these companies have been identified, it is crucial to invest at the right price. Future revenues should not be overpaid, this is one of the major risk of thematic investing, where over-valuation may appear due to momentum
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Growing population creates more needs for everything and stimulates the economic growth, the combination of a growing and richer population creates great business opportunities for many companies in the consumer and discretionary sectors for example. Ageing population is already a reality and will increase in the years to come. Population ageing is one of the strongest trends of this century and it will have important implications. The consequences of an ageing population are diverse. On the negative side, we can stress the high cost for governments (retirement, medical expenses, and dependence). These liabilities are known but not taken into account at the present time. It is going to be a great challenge and it will hedge on public balance, debt and economic growth for a long period of time putting possibly more deflationary pressures. In the other hand, an ageing population creates large room for opportunities: strong pressure on government spending will create room for private sector to develop services and take part of the “grey business”, new services and specific age related products will have to be invented, many economic sectors will be positively impacted. The urban population will continue to grow, by 2030, almost 60% of the world 's population will live in urban areas, compared with around 53% today.

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