Thematic investing is not an empty phrase

Megatrends such as climate change, demographic ageing or technological transformation are powerful structural changes with irreversible consequences for the world around us. ‘Megatrends impact how we live and how we shape the future. They pose enormous challenges. When companies embrace megatrends, they create a wealth of opportunities for investors,’ says Joris De Moor of KBC Asset Management.

‘A megatrend creates opportunities, but it’s the specific investment themes that provide a response to the structural trends,’ says De Moor. That’s why KBC Asset Management chooses to cluster together companies that offer specific solutions to a megatrend. For example, care providers and health-care companies form one cluster, which in turn covers themes like digital health care, but also online pharmacies, care for the elderly, investment in assisted-living homes, right through to robots that support senior citizens.

Another example concerns companies that are responding to the society of the future. That cluster covers such themes as energy transition, smart logistics and the circular economy. ‘In theory, you could set up a separate investment fund around each of these individual themes. However, they would in effect be niche funds, which are less likely to be included in the type of widely diversified investment portfolio that most investors are looking for,’ says Regine Debeuckelaere, General Manager at KBC Private Banking.

In practice, KBC Asset Management identifies 75 themes, which it then groups into five thematic funds. ‘By having a limited number of thematic investment funds, we want to ensure maximum exposure to megatrends,’ says Debeuckelaere.

‘Such an approach makes for a healthy spread of risk. Investors get the opportunity to invest in companies with a clear vision of the future, but without being exposed to the extremes of just one sector, one region or one promising technology,’ says De Moor. ‘It also enables these investments to capitalise on the strategic focuses of the entire investment strategy, along with the rest of the portfolio. That’s because thematic investing is part of a whole and not just something on its own,’ adds Debeuckelaere.

This approach also provides investors with the opportunity to set their own focuses by offering them a choice between specific types of thematic fund so they can closely align their investment with their life philosophy. ‘Investing in this way becomes almost intuitive’, says Debeuckelaere.