ETF Securities white paper on thematic investing. I think this sort of investing is very important for investors and advisors. Capturing these megatrends as part of a core-satellite investment approach using the efficency of ETF's can deliver outperformance and engage investors.
When constructing portfolios, investors try to isolate sources of return. Common approaches include targeting specific factors like value or growth, or targeting sectors like technology or healthcare. By taking a targeted approach, investors can manage risk, express a view, or outperform.
A new method, which is growing in popularity is to target specific investment themes – or “megatrends” – in place of factors or sectors. In this way investors can access high growth opportunities which are not yet fully captured by conventional sectors or unexpressed by factors. They can also manage risk by hedging against the disruption that global economic ructions can cause.
In this whitepaper we unpack what megatrends are, how they can be identified and invested in, and what they can offer investors.
WHAT ARE MEGATRENDS?
The term megatrend was introduced by the author and consultant John Naisbitt in his 1982 book “Megatrends”. In his book, which sold 14 million copies, he forecast that the US would turn into a post-industrial society driven by a knowledge economy. He identified 10 “megatrends” that would drive the change. While some of his predictions had to be revised, several proved correct – especially the growth of the tech sector. His concept of megatrends survives to this day.
Read the white paper here