How to become a Thematic investor

Our new range of Thematic portfolios gives you the opportunity to invest in the trends that are shaping our future.  

You can tap into Technological innovation, invest in the Resource transformation, or focus on the needs and demands of the Evolving consumer.

They are all interesting, exciting, and important in their own way.

Wondering which one to choose, or how to get started? Here’s our guide to becoming a Thematic investor.

1. Get to know the basics

First and foremost, it’s crucial to understand what thematic investing is.

Thematic investing is a long-term strategy that invests in the trends that are shaping our future – and are likely to keep doing so in the decades to come.

These trends can stem from structural changes to our society, which include shifts in how we use technology, where we get our energy, demographic change, and the reallocation of resources.

These structural shifts take place over the long-term, and so the time horizon for thematic investing is of a similar duration.

Thematic portfolios give you exposure to companies that are likely to benefit from or contribute to the development of these trends.

2. Understand our three themes

It’s important to understand why we have selected our three themes, what they focus on, and the areas or sectors in which they invest.

After researching the structural growth drivers of the future economy, our investment team identified several themes which are positioned to benefit from these growth drivers. They selected the three themes research showed were the most established, exhibited the greatest potential for future growth, and had sufficient depth and breadth. 

Our Evolving consumer theme concentrates on the rising importance of digital products and services, ageing populations and their evolving healthcare needs, and growing consumer spending in emerging markets. 

Our Technological innovation theme focuses on a series of underlying trends which include the acceleration in the adoption of robotics and automated solutions, increasing demand for cloud computing and cyber security services, growing use of semiconductors, and artificial intelligence.

Finally, our Resource transformation theme covers a range of different trends, including the mix of renewable and non-renewable energy sources needed to power our future a shift in the way we use resources, the materials required to electrify and construct the future, and the ever-growing demand for clean water.

To dive deeper into our themes, click here.

3. Understand how Thematic portfolios are managed, and how returns work

Before you invest, it’s important to be clear on how our team will manage your portfolio, and what to expect when it comes to returns.

Your overall portfolio will consist 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 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.

The themes we have chosen invest in trends that we expect to flourish over the coming years. They are structural in nature, rather than cyclical or hype-driven, and this longevity is likely to be reflected in the return profile of the portfolio.

What this means is that you’re unlikely to see a ‘boom’ in returns – the type that you may expect to see from a short-term rally in a certain stock or sector. 

We speak a lot about the importance of investing for the long-term, and that rings especially true when it comes to our Thematic portfolios. We expect these themes to shape society over the coming generations, and believe that exciting opportunities await investors as they continue to develop and evolve. 

4. Get to know the risk levels of our Thematic portfolios

Once you understand our investment process, have researched our themes, and feel informed and comfortable with the style of Thematic investing, it’s good to have an awareness of the risk levels of our Thematic portfolio range.  

We’ve made our Thematic portfolios available to investors with a risk level of 5 and above, to allow for sufficient exposure to your chosen theme.

The size of the Thematic portion relative to your overall portfolio depends on the risk level you choose. The higher your risk level, the greater your Thematic exposure. For example, if you are risk level 5, your exposure to Thematic funds is 10% of your overall portfolio, and if your risk level is 10, your exposure to Thematic funds is 20% of your overall portfolio.

We place the utmost importance on matching our clients to an appropriate risk level, which is why we ask you to fill out a risk questionnaire when you first start investing with us. If you’d like to learn more about the risk levels of our Thematic portfolios, and their asset allocation, click here. If you’d like to learn more about investment risk in general, click here.

Thematic investing is an exciting, long-term opportunity, and gives you the ability to choose the theme you think has the most potential. This introductory guide provided an overview of the key considerations for potential investors – but there’s plenty more material available for you to explore. Just click here.

Risk warning

As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can do down as well as up and you may get back less than you invest. Forecasts are not a reliable indicator of future performance. Thematic investing carries specific risks and is not for everyone. There is no guarantee that development of the trend will contribute to positive investment outcome. All Nutmeg themes, including Resource transformation, should not be considered as incorporating ESG considerations. The Resource transformation theme will likely have exposure to a variety of renewable and non-renewable materials and energy sources.