Thematic equities - Fiduciary Investors Symposium آ  experience in thematic investing, we believe thematic

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  • Thematic equities

    Investment strategies powered by

    global megatrends

  • 2 3

    Recent market events suggest that uncertainty is likely to be a key feature of the investment landscape for much of the next decade and beyond. For investors willing to take on the challenge of navigating economic cycles, a turbulent journey awaits.

    At Pictet Asset Management (Pictet AM), we believe there is a less volatile way to secure attractive long-term returns – one that requires investors to focus instead on the structural forces shaping our world: megatrends. These are powerful global forces aecting the world economy in a pervasive, persistent, and profound manner, and no investor can afford to ignore them.

    There is no doubt the world is currently experiencing a period of upheaval. Monumental shifts in geopolitics, the environment, economies, society and populations are forcing people to adapt and evolve. Major transitions, such as population growth, will present considerable challenges for governments, private companies and individuals over the years to come. How we react to these changes will determine not only our futures, but those of the coming generations.

    To safeguard our future, national governments are increasingly adopting multilateral frameworks, such as global regulations to mitigate climate change. Meanwhile, evolving consumer behaviour is revolutionising how businesses operate, resulting in, for example, the rapid transmission of information via digital networks. Consequently, companies that are able to adapt by creating innovative products and services that meet the new demands of this changing world economy should benefit from unrivalled growth potential. In turn, investors in these companies are likely to be the winners of tomorrow’s world.

    At Pictet Asset Management, with the help of advisers including the Copenhagen Institute for Futures Studies, we have identified 14 megatrends that we believe are shaping the world. Based on our findings, we have developed 10 single-themed equity strategies and 2 multi-themed strategies that aim to pick out the companies best positioned to benefit from these megatrends. With over 20 years’ experience in thematic investing, we believe thematic investing is a strategy for the future.

    Mud rivers near Vestmannaeyjar Islands, South-West Iceland.

    Traditional investment approaches are based on indices that list companies by their market value – in other words, firms that have succeeded in the past. Pictet AM’s thematic strategies, on the other hand, aim to harness the potential of the companies that will succeed in the future. By identifying the megatrends changing the world, we believe we can select the long-term winners in the global stock markets.

    Hans Peter Portner Head of Thematic Equity Investments

    DISCOVER THE STRUCTURAL FORCES TRANSFORMING OUR WORLD

    OUR THEMATIC STRATEGIES ARE POWERED BY THE MEGATRENDS SHAPING OUR WORLD

  • 4 5Pictet Asset Management

    NETWORK ECONOMY The increasing connectedness of business processes and economic activity, enabling the transfer of knowledge and goods directly from provider to receiver

    SUSTAINABILITY The ability to meet current needs without compromising the ability of future generations to meet theirs

    KNOWLEDGE SOCIETY Knowledge is becoming an economic resource in the way raw materials, labour and capital have traditionally been, as society transitions from the industrial age to the information age

    IMMATERIALISATION Consumers are increasingly focusing on the intangible qualities of products and services, such as their ethical or aesthetic appeal, rather than their material attributes

    DEMOCRATISATION More power to the people – politically, economically and culturally

    ACCELERATION & COMPLEXITY The increase in the rate of technological progress over time, resulting in products having a shorter shelf life

    TECHNOLOGY DEVELOPMENT The application of science and knowledge to commercial or industrial processes

    ECONOMIC GROWTH The increase in the world’s capacity to produce goods and services

    INDIVIDUALISATION The evolution of a society once characterised by collective norms to one in which freedom of choice and the expression of one’s individuality are more dominant

    COMMERCIALISATION The process of increasing the efficiency of a sector by transforming it into a commercial business

    GLOBALISATION The increasing global connectedness and flow of people, capital, products, services, information, technology and culture

    POLARISATION When extremes grow at the expense of the middle ground

    FOCUS ON HEALTH Ageing populations, rising wealth and technological advances are making health a major source of expenditure for governments, organisations and individuals across the world

    DEMOGRAPHIC DEVELOPMENT The widening demographic divide between countries with younger workers and those, mostly in the West, with an ageing and shrinking workforce

    From ideas to investments At Pictet Asset Management, we take a highly disciplined approach that helps us distinguish a truly enduring megatrend from a temporary fad. Having identified these megatrends, with the help of advisers, we have created thematic strategies that enable investors to capitalise on the opportunities that they present. We adopt a global thematic approach that both ignores the constraints of benchmarks and seeks to capitalise on the secular trends shaping our world.

    ECONOM IC

    INDIVIDUALISATION COMMERCIALISATION

    GLOBALISATION

    POLARISATION FOCUS ON HEALTH DEMOGRAPHIC

    GROW TH

    DEVELOPMENT

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    PL EX

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    NETW ORK ECONOM

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    In developing our thematic strategies we looked for opportunities and ideas where several megatrends meet. We construct focused thematic strategies at the intersection of a number of megatrends, as the graphic below shows for our Clean Energy strategy. The more megatrends at play in any area, and the stronger their influence, the more compelling the investment theme becomes.

    For us, tomorrow started yesterday We’ve been pioneers in thematic investing for over 20 years. We saw the potential of a thematic approach to investing during the 19 9 0 s, and were one of the first asset managers to launch a biotechnology product. This was followed by our water strategy, which remains one of the very few dedicated to this unique resource.

    Each of our thematic strategies is managed by a team of dedicated specialist investment managers. To make sure our ideas are as robust as possible, each strategy benefits from a dedicated advisory board made up of eminent scientists, business leaders and academics. This enables us to test our views against those of experts in their fields, providing us with a deeper understanding of the structural trends transforming our world.

    Our actively managed thematic strategies seek to deliver a compelling risk-adjusted return over the long run. What’s more, they typically focus on companies providing solutions to global challenges and aim to deliver better outcomes not just for investors, but for everyone.

    Where megatrends connect, powerful themes emerge

    Clean Energy

    ECONOMIC GROWTH

    GLOBALISATION

    FOCUS ON HEALTH

    SUSTAINABILITY

    TECHNOLOGY DEVELOPMENT

    Our range of thematic strategies: — Aim to deliver capital growth by investing in

    companies likely to benefit from powerful global trends.

    — Adopt an active management investment process built on high conviction portfolios.

    — Could be suitable for investors who are prepared to invest over the longer term and are willing to take a potentially higher risk with their investment.

    — May invest in emerging markets. Investments in emerging markets can potentially be of higher risk and volatility than those in developed markets.

  • 6 7Pictet Asset Management

    MULTI- THEMED STRATEGY

    Our Biotech strategy identifies the companies that are best-placed to thrive in an innovative sector, in which breakthroughs that lead to effective treatments for diseases can save people’s lives and prove profitable for investors.

    TECHNOLOGY DEVELOPMENT

    ECONOMIC GROWTH

    FOCUS ON HEALTH

    DEMOGRAPHIC DEVELOPMENT

    Page 10–13

    Biotech

    Our Clean Energy strategy offers investors the opportunity to profit from the structural changes underway in the global energy industry, such as the gradual transition to a lower-carbon economy.

    SUSTAINABILITY

    TECHNOLOGY DEVELOPMENT

    ECONOMIC GROWTH

    GLOBALISATION

    FOCUS ON HEALTH

    Page 14–17

    Clean Energy

    Our Digital strategy aims to capture the growth opportunities resulting from the increasing ubiquity of digital technology, an area in which constant innovation is disrupting established business models to create a digital revolution.

    NETWORK ECONOMY

    DEMOCRATISATION

    ACCELERATION & COMPLEXITY

    TECHNOLOGY DEVELOPMENT

    INDIVIDUALISATION

    DEMOGRAPHIC DEVEL