Our Thematic investing process
We combine top-down macroeconomic research and rigorous ETF selection.
With investment, your capital is at risk.
How did we choose our three themes?
We began by defining the core pillars of economic growth:
Productivity
How efficient is the economy in producing goods or providing services – historically driven by advances in technology
Resources
The inputs that allow us to make goods, or deliver services, ranging from commodities to energy
Population
Consumers, and their evolving needs, desires, and behaviours
We then researched what could shape, drive, or influence the evolution of these pillars over the years to come.
This allowed us to identify our three themes, which are positioned to benefit from these growth drivers.
The Technological innovation theme focuses on the commercial and industrial adoption of new technologies, and relates to the pillar of productivity.
The Resource transformation theme taps into the economy's evolving energy and commodity needs, as we become more dependent on electricity.
The Evolving consumer theme focuses on population change, consumption habits, and the needs of different markets around the world.
Each theme is therefore an expression of one of our three pillars. Each theme is well established, exhibits potential to develop in the future, and has sufficient depth and breadth.
Understanding Thematic equity exposure
Each portfolio consists of a Thematic portion, which will invest in ETFs aligned with your chosen theme (the size of this portion depends on your risk level), and an actively managed portion, which will invest in a globally diversified range of ETFs.
The higher your risk level, the greater your Thematic exposure. For example, if you are risk level 5, the Thematic portion is 10% of your overall portfolio, and if your risk level is 10, your exposure to Thematic funds is 20% of your overall portfolio.
The Thematic portion of your portfolio will be reviewed by our investment team annually and will be rebalanced at regular intervals. Due to the long-term nature of the trends that these portfolios invest in, the Thematic portion requires less frequent intervention.
How did we choose our Thematic ETFs?
When selecting the exchange traded funds (ETFs) for our Thematic portfolios, we chose those which had strong relationship to our themes, were an appropriate size, and sufficient market liquidity.
Relationship to the theme
Thematic exchange traded funds (ETFs) invest in a basket of companies that are aligned to their chosen theme.
The thematic fund's index provider chooses which companies to include, and uses a set of criteria to help them do this, which can range from industry classification, to where they earn their money, and more. There are many index providers, and many thematic funds, and this results in a great deal of variety across the board.
Methodology matters. It dictates which stocks are selected, how they are weighed against one another, and ultimately, investment returns.
We looked at methodologies of different index providers, focusing specifically on purity of the theme – in other words, how aligned each company was to the theme of that overall ETF.
Size and market liquidity
The size of a fund and its market liquidity (how easily and quickly it can be sold) are closely related.
Larger funds have more liquidity. This minimises the costs to our investors. In addition, it also means that our clients are not concentrated into a fund which has increased risk of it being closed by the provider.
Given the long-term nature of the Thematic portion of the portfolios, we don't expect to make frequent adjustments or changes to its underlying ETFs. However, we regularly review the ETFs within the Thematic portion, and also keep an eye on developments within the industry. New ETFs come to market quite regularly, and scalability is also an important consideration: we may make changes where it is appropriate for us to include from size, market liquidity or both.
How are Thematic portfolios managed?
The actively managed portion will be adjusted in line with the investment team’s broader market research and analysis. The Thematic portion requires less intervention, so will be regularly monitored and rebalanced at least annually.
Our Thematic portfolios compared
Technological innovation
Invest in technological advances and innovation driving the modern world. With exposure to the:
Resource transformation
Invest in the ways we utilise energy and resources to meet the world's future needs. With exposure to the:
Evolving consumer
Invest in the evolving demands and needs of our global population. With exposure to the:
What other investment styles are available?
All five Nutmeg investment styles are built by experts and use exchange traded funds (more on ETFs here) to diversify across stocks, bonds, industries, even countries. Choose the one that works for you.
Fully managed
Proactively managed portfolio
Find out more
Smart Alpha
Powered by J.P. Morgan Asset Management
Find out more
Socially responsible investing
With a focus on the environment and society
Find out more
Fixed Allocation
Assets without intervention at a low cost
Find out more
Thematic investing
Invest in the long-term trends shaping our world.
Find out more
Most people ask us
Is this an active or passive style of investing?
Is this an active or passive style of investing?
Your Thematic portfolio will be split into two portions:
Thematic
This portion of your portfolio will invest in ETFs that focus on your chosen theme. The size of this portion depends on your risk level – the higher your risk level, the greater your Thematic exposure. Our investment team will review this portion annually and rebalance it at regular intervals.
Actively managed
The rest of your portfolio will invest in a globally diversified range of ETFs that are not specific to your chosen theme. This portion will be actively managed by our experienced investment team, who regularly rebalance your portfolio and make strategic adjustments.
Why is the Thematic portion managed separately to the rest of the portfolio?
Why is the Thematic portion managed separately to the rest of the portfolio?
The Thematic portion of the portfolio is designed to provide exposure to the theme you have selected. The actively managed portion is designed to help you stay globally-diversified and risk-adjusted, and provides broad market exposure to different asset classes and sectors.
Why does the Thematic portion only invest in ETFs focused on equities?
Why does the Thematic portion only invest in ETFs focused on equities?
The style of Thematic investing focuses solely on equities. To our knowledge, thematic indices and vehicles for bonds do not exist like they do for equities.
To that end, one portion of your portfolio will be invested in ETFs that focus on your chosen theme, and which will invest in equities. The size of this portion will be determined by your risk level. The remaining portion of your portfolio will be made up of actively managed funds that invest in a globally diversified range of ETFs which invest in both equities and bonds.
Learn more about Thematic investing
Thematic portfolios are here
Four reasons to consider Thematic investing
