What is thematic investing?
Thematic investing is an approach that focuses on multiyear structural forces, rather than individual companies or sectors, that may be less correlated to traditional economic cycles. These forces are changing the world around us and may be supported by government policy, demographic shifts and/or technological advancements. By targeting structural trends across regions, industries and investment styles, such a theme-focused approach may offer investors broader access to tomorrow’s potential winners today.
How do you find and develop investment themes?
We seek to identify themes that align with sustainable economic development and benefit from structural tailwinds related, for example, to policy, demographics, or innovation, and assess what opportunity each theme is seeking to capture. Uncovering the themes we consider to have the most compelling potential involves close collaboration between our investment team and Wellington’s global industry analysts, macro strategists and sustainability experts. We also draw on a range of external sources, including supranational, government and industry reports, as well as academic research.
How do you rank themes?
We aim to invest in between five and 10 themes in which we have long-term high conviction, related to inclusion, sustainability and innovation. While our approach is long-term oriented, we view risk management as a key component of our investment process in seeking to smooth returns and provide stability in the face of shifts in sentiment and fundamentals. We assess valuations, price and earnings momentum and profitability trends to inform our decision making on which themes are the most attractive over shorter time horizons. The thematic scores and rankings we construct incorporate both quantitative and qualitative views into our decision making.
Can thematic investing incorporate sustainability and ESG goals?
Yes. Sustainable economic development is an overarching consideration for all our investments. We believe durable development involves increasing economies’ productive capacity while using available resources responsibly and promoting economic inclusivity and better quality of life for citizens. We view ESG analysis and integration as potentially both return-enhancing and risk-mitigating, and we incorporate ESG criteria into our analysis of each investment, both at the time of purchase and on an ongoing basis.