Because their momentum is strong, many trends drive global capital markets. Against this backdrop, thematic and strategy investments could create added value in an investment portfolio – and make them more future-oriented.
In challenging market situations, it can be especially helpful to think unconventionally, to look at the investment macrocosm from a different perspective. "Think outside the box" is a common phrase that many have adopted as their mission statement, and that also has the potential to open up new opportunities.
Are conventional portfolio approaches a thing of the past?
It's not just that people are increasingly calling the effectiveness of classic fixed-income investments into question. Tried-and-tested equity strategies are also increasingly losing their status as a guarantee for successful investment. For example, the inherent short-sightedness of a traditional relative value strategy conflicts with the investment portfolio's long-term nature. As such, and as a consequence of focusing exclusively on the benchmark, opportunities could be missed. The conventional approach to benchmarking fails to take account of trend, that are unleashing their vast dynamic forces in many new areas. One solution that is at least a partial countermeasure involves integrating thematic or strategy investments into a portfolio.
What can generate the opportunities presented by thematic and strategy investments? Put simply, the basic idea is to exploit a "good idea" or "market opportunity" – i.e., a theme – in a yield-related way. The focus is not on any one specific stock, sector, or region. Instead, the emphasis is on macro-economic, political, legal, and technological opportunities that could potentially benefit from trends and that are therefore likely to see positive growth. The underlying principle is: if business, revenue, and income developments benefit massively from a specific theme, then maybe those rising revenues and profits will drive up share prices as well. The success of an investment theme depends on where and in what way returns and risks are concentrated over the entire investment period. HOwever, just because a trend picks up speed and perhaps gives rise to investment themes, it does not automatically follow that it will generate a positive return. For some investments it's just too early, and for others it's too late. Ideally, a potentially strong trend needs to be jumped on shortly before it gets going. Because as soon as the majority of investors have discovered a theme, their mounting interest raises the possibility of share prices increasing. So it's clear that not only early detection, but also fast market access and a certain level of flexibility are indispensable when it comes to potential adjustments. We seek out these themes and make them easy for you to invest in.
Making thematic and strategic investments investible – analyzing, identifying, selecting
Wayne Gretzky "The Great One" once said: "A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be." Investing with thematic certificates is based on this way of thinking. Some trends have such a resounding impact that they open up opportunities over a longer period. "Thematic" investors could underscore their portfolios and benefit from a potential price uptick in the corresponding company shares. And it's these companies that need identifying. At the latest during portfolio management it becomes clear that active thematic investments can only be successful if there is not too much effort involved in their administration. Given that the market situation and forces are constantly evolving, successful thematic investments have to be reorganized from time to time – in terms of their share structure. Analyze, identify, select: a never ending, Sisyphean task and proof that this challenging work requires not just good judgment, but also a great deal of time.
No-one wants to toil like Sisyphus
Are there any investors capable of continuously monitoring so many individual securities themselves in any level of detail, while also having enough free time to execute the countless transactions involved? Index managers and consultants can handle all this on your behalf. Index managers and consultants are finance experts who deploy their knowledge and experience to determine the index strategy and selection process, while simultaneously striving for the best approach realize the various themes.
Cost-transparent and cost-effective implementation in one index
Because regularly buying and selling can quickly see costs skyrocketing, the process of implementation in the portfolio can also become more expensive; the majority of potential returns can soon be eaten up by transaction costs. One possible solution: theme certificates that allow for efficient thematic and trend investment. Investors only have to execute one buy transaction for one of these participation products, giving them prompt market access while also being an efficient way to invest in a selected thematic index. Investors remain flexible throughout the investment period without having to make their own adjustments. The dynamic thematic index ensures that the theme is continuously diversified, transparent, and rigorously tracked in line with the index guide. However, this calls for a transparent index guide to be clearly defined before launching.
Are you an asset manager, family office, or bank and are interested in making a theme or strategy investible? Discover more about what we offer: