A source of diversification but also an expression of strong convictions, thematic asset management is becoming more and more popular with investors. Today, it involves structurally promising subjects that make their investments more meaningful.
To learn more about thematic asset management and the distinctive offer developed by Indosuez Gestion, we met with Thematic and International Actions Asset Manager Séverine Piot-Deval.
Thematic asset management today meets the expectations of a growing number of clients who are keen to follow new trends. What is the set-up at Indosuez Gestion?
Indosuez Gestion has a team exclusively dedicated to thematic and international equities. We are responsible for managing US equity mandates and three global thematic funds, Indosuez Global Trends, Indosuez Objectif Terre and Indosuez Biens Réels.
We were joined by Stéphane Darrasse three years ago and more recently by Zoé Ormières-Selves, who finalised the launch of Objectif Terre and manages it.
We also have access to the expertise of all the Indosuez Gestion teams.
Why is now a good time to consider thematic asset management?
The world is faced with demographic, innovative and environmental challenges that impact economic growth. In this context, companies that respond to these issues by offering innovative and sustainable solutions can be quite promising. So the objective of thematic management is to generate performance via a selection of securities from companies responding to targeted issues. The thematic approach provides exposure to structural and cyclical themes over the long term, allowing us to take a step back from market fluctuations.
What can you tell us about Indosuez Global Trends, which invests in several promising themes?
Indosuez Global Trends is a megatrends fund. This means that its portfolio is made up of securities of businesses responding to several of the major global challenges of today’s societies, such as population ageing, the rise of the middle class in emerging countries, connectivity, and global warming. Through this diversification, we can take advantage of multiple investment opportunities on themes that are independent from each other.
In addition, Indosuez Objectif Terre and Indosuez Global Trends exclude from their portfolios companies with a significant share of their activity in fossil fuels.
Indosuez Objectif Terre takes an interest in climate issues. Why did they choose this theme?
Yes, Indosuez Objectif Terre was created to allow our clients to invest in companies working to respond to the challenges of climate change. We believe that these issues will be paramount in the coming decades. The success of the fund and its performance since its launch last November confirm this choice, all the more since the fund should be getting an SRI label this year.
What about Indosuez Biens Réels?
Indosuez Biens Réels provides indirect exposure to the area of real assets. It invests for instance in listed shares of real estate, energy and mining companies such as gold mining.
What themes do you see as promising today?
We have mentioned population ageing, which translates into special needs in terms of health, housing, consumption, and even financial services.
Climate issues, in particular the fight against global warming and the development of the circular economy are among the most promising contemporary themes.
In a completely different field, Indosuez Global Trends also allows us to focus on the question of connectivity and its many ramifications (mobile telephony and connected objects, 5G, big data, cybersecurity), or changes in consumption (rise of the Asian consumer, Millennial consumption trends such as streaming).
How do you choose which securities to include in the portfolio?
First, we define an investment universe for each fund. This brings together all the companies falling under one of the selected themes that we have identified over time.
Thus, the investment universe of Indosuez Global trends is made up of around 700 securities, and 400 securities for Indosuez Objectif Terre.
The funds we manage are global, and therefore benefit from geographic diversification in addition to thematic and sectoral diversification.
We then select securities based on a basic analysis of the companies reviewing their business model, their recent news, the main risks they are likely to face, and their valuation.
At the end of this proven and rigorous selection process, we build up the portfolio according to our level of confidence in each security. It is monitored daily and at our weekly meetings, which also have the advantage of including the input of the risk monitoring teams.
Our expertise is now recognised and the whole team is proud of the fact that Indosuez Global Trends and Indosuez Objectif Terre are in the first quartile of the Morningstar ranking.
Are there particular risks inherent in thematic funds?
The three funds we have mentioned are equity funds, which carry the risks inherent in funds invested in equities: the risk linked to discretionary management, equity and market risk, currency risk, and risk of capital loss*.
Monothematic funds may be less diversified compared to the market, which is to their advantage when the theme is buoyant, but can lead to underperformance compared to the market when it is not.
*Risk linked to discretionary management: The performance of the portfolio depends on the financial instruments chosen and assets allocated by the manager. There is thus a risk that the portfolio may not be invested in the sectors delivering the best performance at all times and the allocation between the different markets may not be optimal. This risk may cause a drop in net asset value for the holder. Equity and market risk: Since the fund is exposed to the equity markets, its net asset value may fall in the event of a decline in the equity markets. Currency risk: The fund may be exposed directly and indirectly to currency risk on the portion of its assets invested in securities denominated in a currency other than the euro (up to 100% of its net assets). The unfavourable development of these currencies may cause a drop in the net asset value. Risk of capital loss: The investor is warned that the principal is not guaranteed and may not be returned in full.
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