Why is thematic investing relevant?
Thematic investing, particularly in form of thematic ETFs which track thematic indices, has seen exponential growth over the last few years as investors seek to diversify away from traditional cycle-sensitive sector exposures and into long-term structural economic trends.
In doing so, they target the beneficiaries of transformative forces shaping the global economy and societies. Primarily among them is the wave of technology-driven innovation, which creates efficiencies in businesses, shifts human activity to the digital space, and pushes breakthrough advances in healthcare, communications, and other industries.
- What is the difference between thematic and sector investing?
- What are the megatrends and how do they drive thematic investing?
- What makes STOXX´s thematic indices different?
- How are thematic indices calculated?
- Which selection methodologies are used?
- Key thematic indices
- A closer look: STOXX Global Digital Entertainment and Education Index
What is the difference between thematic and sector investing?
It’s important to distinguish between thematic investing or theme investments and sector investing. In a nutshell, thematic indices select stocks belonging to multiple sectors that suit a theme, while sector indices focus on one particular sector. A typical sector index will concentrate on banking, chemicals or construction. Thematic indices are much broader, a typical thematic index will focus on a theme such as digital security or breakthrough healthcare.
What are the megatrends and how do they drive thematic investing?
Seismic shifts in the environment, demographics and technology — known as megatrends — are transforming politics, economics and consumer behavior. Thematic investing positions portfolios for growth, seeking the beneficiaries of these broad and disruptive developments changing our society.
Megatrend #1:
Environment
Growing societal awareness of environmental and sustainability issues are impacting our quality of life
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Megatrend #2:
Future technology
Technological advancements and digital innovations are changing our daily lives and making them more efficient
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Megatrend #3:
Socio-dEmographics
Shifts in global demographics will bring significant challenges and opportunities for societies and businesses
What makes STOXX’s thematic indices different?
Expertise
We have a team of dedicated thematic product developers researching new themes, allowing us to identify emerging trends ahead of the competition
Long-term view
We develop solutions that are intended to span business cycles and focus on megatrends rather than short-termism
Partnerships
We work closely with clients from idea generation to launch while drawing from both external and internal expertise
Customization
Our expertise allows us to tweak a concept, amend the starting universe, and apply additional data sets if needed
Open architecture
Clients benefit from our partnerships with leading data providers
How are thematic indices calculated?
Our thematic indices focus on companies from various industries honing in on a range of structural concepts with long-term economic impact. They attempt to identify current megatrends with future impact using a rules-based, transparent, and systematic approach. The indices can be used as underlyings for thematic ETFs, thematic funds, structured products and exchange-traded derivatives.
When it comes to thematic investing, there is no one-for-all approach. Therefore, we use different selection methodologies.
A CLOSER LOOK
STOXX Global Digital Entertainment and Education Index
Our recent white paper, “The future of school and play: STOXX Global Digital Entertainment and Education Index,” analyzes the performance of the index versus the broad market. The STOXX Global Digital Entertainment and Education Index (GDEE Index) captures the global digital transformation of entertainment and education — a long-term structural change. Between 2015 and 2022, the index outperformed both the global market and the STOXX Global 3000 Media Index and demonstrated similar performance (with different drivers) to the STOXX Global 3000 Technology Index.
Related news & research
STOXX’s Singhal: Thematics could follow sectors in becoming a portfolio staple
A key evolution to watch within thematic strategies is not just their increasing sophistication but their growing presence within mainstream investment portfolios, according to Arun Singhal, managing director and global head of product management at STOXX.
Copper prices jump on market outlook, lifting miners’ shares
Prices for copper have climbed more than 10% this year as analysts speak of a new “secular bull market.” The positive sentiment has caught on shares of mining companies, with the STOXX® Global Copper Miners Index jumping 16.3% last month.
Monthly Index News: March 2024
Stocks gained for a fifth straight month in March, lifting the STOXX® Global 1800 index to a new all-time high, as investors raised their estimates for global economic growth.
Monthly Index News: February 2024
Stocks extended gains in February, lifting the STOXX® Global 1800 index to a record high, following better-than-expected US labour market and corporate earnings reports.
STOXX Thematic indices: Capturing social and economic megatrends
As it turns 13, the STOXX Thematics index suite continues to grow, offering investors exposure to structural megratrends changing our modern world. We look at the historical performance of the indices and zoom in on 2023 – a year dominated by technology themes.
Monthly Index News: January 2024
Stocks extended gains in January, lifting the STOXX® Global 1800 index near an all-time high, as optimism that major central banks will soon start cutting interest rates carried into the new year.
Q&A with BlackRock’s Moufti: Capturing the upside from essential metals miners
Omar Moufti, Thematics and Sectors Product strategist at BlackRock, says the transition to a low-carbon economy is just one of the forces propelling the copper and lithium industries, and explains why investing in the miners’ stocks may be an attractive long-term proposition for investors.
Monthly Index News: December 2023
Stocks extended gains in December, pushing the STOXX® Global 1800 index to a record high, on optimism that the Federal Reserve has managed to bring inflation under control without causing a recession.