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Busting thematic investment myths

2 Authors - Portfolio perspectives
13/10/2021 · 1 Min

Interest in thematic investing has grown markedly in recent years. According to Morningstar, assets under management in thematic funds have more than tripled to USD 595 billion in the last three years. [1]  

While much of this uplift can be attributed to investor expectations of robust long-term performance, thematic funds often have a strong focus on sustainable investing which has also spurred interest.

Upcoming regulatory changes such as the integration of ESG [2] preferences in investor choices under MiFID II [3], as well as rising demand from more environmentally and socially conscious investors, mean that interest for sustainably-orientated thematic funds is likely to continue to grow.

Yet, with over 3 000 sustainable funds available to European investors [4], fund selectors face a huge challenge: How to find investment managers and strategies that can deliver on both performance and their sustainability ambitions. In addition, several myths surround this area that could keep investors from making an effective assessment of potential sustainable thematic funds.

In “Busting thematic investment myths”, our Environmental Strategies Group explores these myths to help investors distinguish between those funds that merely say and those that actually do.

[1] Source: Morningstar, Global Thematic Funds Landscape Report, May 2021  

[2] ESG: environmental, social and governance  

[3] MiFID II is an EU legislative framework to regulate financial markets in the bloc and improve protection for investors. Its aim is to standardise practices across the EU. Source:  

[4] Source: Morningstar, as at end December 2020  

Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

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