Themes like a good idea
When it comes to investing, following the status quo is not always the best option, according to Zurich Investments, which is celebrating the success of its thematic approach.
Thematic investing involves identifying major themes in the global economy and investing in the stocks that are most likely to benefit from them.
Themes are developed by examining major changes taking place around the world, such as structural, economic, social, demographic and political events.
Unlike more traditional management techniques, the benchmark allocations of countries or sectors play no part in the investment process.
Zurich investment specialist James Holt explained how blindly following a benchmark could be a mistake by predicting that China would overtake the US as the world’s largest economy in 2035, as indicated by Goldman Sachs research.
“Why then, a global investor might ask, would I want to start today with an allocation of 50 per cent to US shares?” Holt said.
“Because that is what they currently make up in the MSCI, and what would be allocated with a benchmark-aware approach to investing.
“For investors seeking exposure to the best investment opportunities in the future, the MSCI world remains a poor guide.”
The Zurich Investments International Share Fund employs a thematic investment approach, and at any one time can include a portfolio of eight to 12 themes, which are deliberately unique from one another to obtain broad exposure.
Zurich claimed this approach had delivered strong long-term returns, and that the fund had been significantly less volatile compared to the MSCI.
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