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Advantages And Main Challenges Of Thematic Investment

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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 …show more content…

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 …show more content…

At this stage of the process, we don’t talk about financial analysis but about understanding different specific topics such as demography, geopolitics, innovations etc. Therefore, investment teams need to rely on people (internally and/or externally) that have the knowledge and the competence to understand these changes and theirs consequences. Financial analysts and portfolio managers who work in a closed environment do not have the tools to analyze seriously these trends. Therefore to source the right themes, it is crucial to either rely on appropriate external competences with university studies, specific consultants, and scientific publications or add new competences in the investment teams with engineers, scientists, medical doctors, demographers, in one word, with

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