Why is thematic investing relevant?
Thematic investing, particularly in form of thematic ETFs which track thematic indices, has seen exponential growth over the last few years as investors seek to diversify away from traditional cycle-sensitive sector exposures and into long-term structural economic trends.
In doing so, they target the beneficiaries of transformative forces shaping the global economy and societies. Primarily among them is the wave of technology-driven innovation, which creates efficiencies in businesses, shifts human activity to the digital space, and pushes breakthrough advances in healthcare, communications, and other industries.
- What is the difference between thematic and sector investing?
- What are the megatrends and how do they drive thematic investing?
- What makes Qontigo’s thematic indices different?
- How are thematic indices calculated?
- Which selection methodologies are used?
- Key thematic indices
- A closer look: STOXX Global Digital Entertainment and Education Index
What is the difference between thematic and sector investing?
It’s important to distinguish between thematic investing or theme investments and sector investing. In a nutshell, thematic indices select stocks belonging to multiple sectors that suit a theme, while sector indices focus on one particular sector. A typical sector index will concentrate on banking, chemicals or construction. Thematic indices are much broader, a typical thematic index will focus on a theme such as digital security or breakthrough healthcare.
What are the megatrends and how do they drive thematic investing?
Seismic shifts in the environment, demographics and technology — known as megatrends — are transforming politics, economics and consumer behavior. Thematic investing positions portfolios for growth, seeking the beneficiaries of these broad and disruptive developments changing our society.
Megatrend #1:
Environment
Growing societal awareness of environmental and sustainability issues are impacting our quality of life
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Megatrend #2:
Future technology
Technological advancements and digital innovations are changing our daily lives and making them more efficient
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Megatrend #3:
Socio-dEmographics
Shifts in global demographics will bring significant challenges and opportunities for societies and businesses
What makes Qontigo’s thematic indices different?
Expertise
We have a team of dedicated thematic product developers researching new themes, allowing us to identify emerging trends ahead of the competition
Long-term view
We develop solutions that are intended to span business cycles and focus on megatrends rather than short-termism
Partnerships
We work closely with clients from idea generation to launch while drawing from both external and internal expertise
Customization
Our expertise allows us to tweak a concept, amend the starting universe, and apply additional data sets if needed
Open architecture
Clients benefit from our partnerships with leading data providers
How are thematic indices calculated?
Our thematic indices focus on companies from various industries honing in on a range of structural concepts with long-term economic impact. They attempt to identify current megatrends with future impact using a rules-based, transparent, and systematic approach. The indices can be used as underlyings for thematic ETFs, thematic funds, structured products and exchange-traded derivatives.
When it comes to thematic investing, there is no one-for-all approach. Therefore, we use three different selection methodologies.
A CLOSER LOOK
STOXX Global Digital Entertainment and Education Index
Our recent white paper, “The future of school and play: STOXX Global Digital Entertainment and Education Index,” analyzes the performance of the index versus the broad market. The STOXX Global Digital Entertainment and Education Index (GDEE Index) captures the global digital transformation of entertainment and education — a long-term structural change. Between 2015 and 2022, the index outperformed both the global market and the STOXX Global 3000 Media Index and demonstrated similar performance (with different drivers) to the STOXX Global 3000 Technology Index.
Related news & research
Taking a closer look at structured products in an increasingly complex world
Two panels at the SRP Europe Conference 2023 discussed the role of index design in building structured products for a changing market landscape. Topics covered include rising interest rates and volatility, and growing demand for sustainability and thematic investment strategies.
Opinion: Wall Street always has a story to tell, and the best investors know to expect plot twists
Monthly Index News: February 2023
US and Asian stocks fell in February, as better-than-expected economic reports in the US signaled the Federal Reserve has room to continue raising interest rates. European shares climbed when measured in euros.
Monthly Index News: January 2023
Stocks jumped in January as expectations built up that inflation worldwide may have peaked and that any recession in key developed economies may be mild.
The Metaverse: investing at the new digital frontier
The recently launched STOXX Global Metaverse Index uses a sophisticated methodology to screen those companies with the most relevant patents in technologies associated with the Metaverse. This allows investors to target innovators whose products and services are likely to be leading the transition to the virtual world in the coming years. A new Qontigo whitepaper explores the index in detail.
Using patent data to capture the greatest innovators in the Metaverse
In this paper, we explore the rationale and methodology behind the construction of the index. We start by explaining the concept of megatrends and how they can be captured through thematic indexing, using a multifaceted approach. We look as well at the index performance before concluding with an outlook on the opportunities for the Metaverse in the years to come.
Monthly Index News: December 2022
Stocks declined in December, wrapping the STOXX® Global 1800 index’s worst year since 2008, as investor concerns lingered about the impact of inflation and higher interest rates on economic and earnings growth.
Metaverse ETFs’ Boom and Bust
“The overarching story around the components that make up Metaverse still have a very long-term appeal when it comes to growth and innovation,” said Arun Singhal, global head of product management at Qontigo, in an interview with ETF.com.