Why Thematic Investments In A Post-Pandemic World Make Increasing Sense For Global Equity Investors

Financial Advisory

12 October 2021

AIFinancial AdvisoryMeeting of MindsThematic investmentWealth Management and Private Banking

Expert: Simon Gottelier, Senior Portfolio Manager, Thematics AM, Nataxis Facilitator: Richard Romer-Lee, Square Mile Investment Consulting and Research Limited

Session Summary:

This session was presented by Simon Gottelier of Natixis. The philosophy (and answer to the question) is about identifying long-term secular growth themes which will unfold over the next 10, 20 even 30 years and which will deliver superior returns (the aim is “to beat global equities by 2-4% over a cycle gross of fees”). For each theme that becomes a strategy, there needs to be a big enough investable universe of global equities to underpin them. This means a universe of 200-300 stocks and a high active share portfolio of 40-60 stocks, typically with low turnover. The team describes its approach as focussed, unconstrained and responsible investing in secular growth.

The team offers the following strategies: AI and Robotics, Safety, Subscription Economy, Water and Wellness. There is also a 'Meta' fund which invests in all of these. Full details can be found in the presentation included on the App.

AI and Robotics are rapidly becoming part of everyday life. Specific areas include factory automation, design software, medical automation, consumer and services, office automation and supply chain.

Safety affecting all aspects of our day in the digital and real worlds. The sub-themes comprise; connect, shop, eat, move, live and work.

Subscription Economy this is a strategy that boomed (shot the lights out) in the pandemic for obvious reasons (but has had a tougher time so far in 2021). It has a big and diverse investable universe of companies that are both online and offline in the business to consumer and or the business-to-business worlds. One of the features of such companies is their ability to increase customer loyalty.

Water put simply is needed everywhere for everything – there is 100% correlation between water availability and GDP growth. The opportunities are in water supply (e.g. developed market refurbishment spend, ever-increasing global regulation and climate change mitigation) and water demand (e.g. emerging markets demographic changes, industrial economy /private sector growth) in areas of demand efficiency, pollution control and regulated utilities. This results in a barbell between cyclicals and defensives.

Wellness which should not be mistaken for a health or healthcare fund. This focusses on companies helping with better ageing, fitness, mental health, health monitoring and nutrition. These could be focussed on prevention, monitoring or improving the body and or the mind.

The Meta fund invests equally in each of these five strategies, is directly invested (as opposed to a fund-of-funds structure) and rebalances monthly.

How do people use the funds? The answer is in a variety of ways – for example as satellite global equity exposure or as part of natural resource exposure.

The team takes ESG considerations and responsible investing seriously. The Water, Wellness and Safety funds are Article 9 under SFDR, whilst the others are Article 8.

The team are sensitive to capacity constraints and will limit the amounts invested in each strategy accordingly when the time comes.

Each strategy has two named fund managers.