Presentation is loading. Please wait.

Presentation is loading. Please wait.

Thematic Investing Can thematic investments deliver consistent returns? FT Investment Management Summit, 17 September 2014 Luca Paolini , Chief Strategist,

Similar presentations


Presentation on theme: "Thematic Investing Can thematic investments deliver consistent returns? FT Investment Management Summit, 17 September 2014 Luca Paolini , Chief Strategist,"— Presentation transcript:

1 Thematic Investing Can thematic investments deliver consistent returns? FT Investment Management Summit, 17 September 2014 Luca Paolini , Chief Strategist, Pictet Asset Management Pictet Asset Management | For professional investors only |

2 Very low returns in traditional asset classes in the years ahead …
Expected annual return over the next 5 years (p.a.) Source: Pictet Asset Management, as of June 2014 Pictet Asset Management | For professional investors only |

3 … force investors to look for sources of additional return …
ASSET CLASS INVESTMENT STYLE PRODUCTS TACTICAL (<6 months) EM Opportunistic Market Neutral Absolute Return Smart Beta STRATEGIC Valuation anomalies SECULAR (>5 years) EM, Alternatives  Structural growth Mega and macro-trends Thematic investing Examples of Themes by investment horizon Tactical (< 6 months) China recovery (e.g. long materials) Euro weakness (e.g. European exporters) Strategic (>6 months) Higher bond yields – rate hike Capex recovery Secular Megatrends (secular growth and performance engines) Pictet Asset Management | For professional investors only |

4 … and to overcome the traditional allocation straightjacket
Traditional Investing Thematic Investing Benchmark driven Market Cap constraints : focus on past winners Regions easy to invest (e.g. developed) Non-benchmark view : focus on future winners Exposure to secular pockets of growth No geographical constraints No market cap constraints No sector constraints : Thematic investing is a cross-sector, is looking for thematic purity Broaden diversification Pictet Asset Management | For professional investors only |

5 From Megatrends to Investment Themes
Network Economy Sustainability Knowledge & Production Society Demographic Development Focus on Health Immaterialization Polarization Democratization Acceleration & Complexity Globalization Commercialization Individualization Technology Development Economic Growth Digital Communication Generics Premium Brands Agriculture Biotech Water Timber Clean Energy Security Megatrends are long-term forces of change that cause shifts in how companies organize their businesses … and where megatrends meet, thematic investment strategies emerge! Source: Copenhagen Institute for Futures Studies Pictet Asset Management | For professional investors only |

6 Premium Brands - From Megatrends to Investment Themes
Polarization Demographic Development Premium Brands opportunity Spending is growing fastest at the two extremes of the consumer spectrum: cheap and luxury brands are thriving. Rapid growth of the middle class in emerging-market consumers, keen to adopt western lifestyle standards; consumption also fuelled by both the growth and the ageing of the world’s population as over 50s will be wealthier and more leisure oriented than ever. Immaterialization Globalization The evolution from the traditional to “new luxury”brand, which is more diversified, creative and aspirational and targets a broader consumer base. Demand for branded goods has spread far beyond the developed world: emerging markets now account for over 40% of premium brands demand; Chinese consumers will account for almost half of global luxury goods spending by 2025. Economic Growth Individualization Demand for luxury goods is expected to rise by c6-8% CAGR , boosted by the economic growth across emerging markets. Growing sophistication of local consumers and emergence of new heavy spender segments (empowered women, entrepreneurs, celebrities). Source: Copenhagen Institute for Futures Studies Pictet Asset Management | For professional investors only |

7 Water - From Megatrends to Investment Themes
Urbanisation As the world’s population grows, so too will the number of and size of its urban areas. Currently, just under half of the world’s population lives in cities; by 2030, the UN predicts that 53% of us will be living in cities – that’s close to 4 billion people Sustainability Of the world’s total water supply, only 3% is fresh water. And of that 3%, only a quarter is useable – or unpolluted – water. The supply could be further reduced by changes in the world’s climate. Shifts in rainfall patterns, the steady disappearance of glaciers and changing river flows will each have a negative effect on the availability of fresh water, the UN says. Focus on Health Poor water quality as a result of lack of sanitation infrastructure and waste water treatment facility is a major health threat to humans Water Opportunity Economic Growth Commercialization Demand for water is expected to rise by over 50% as population growth increases water use among farmers, industry and households. In the period 2000 to 2050, consumption of water among both farmers and municipalities is expected to have risen threefold; in industry water use is set to double. Water availability is a necessary condition for economic growth. The process of increasing the efficiency of a sector by transforming it into a commercial business. For Water this megatrend is referring to the team up of private companies and public bodies (called Public private partnerships) to provide water services to households and businesses. Source: Copenhagen Institute for Futures Studies Pictet Asset Management | For professional investors only |

8 Performance of Investment Themes
Performance of MSCI World Versus Pictet Theme Strategies since September 2009 (in USD, gross of fees) Source: Pictet, as of September 8th, 2014, in USD, gross of fees Pictet Asset Management | For professional investors only |

9 Benefits from including themes in a portfolio
Individual risk / return profiles compared to MSCI World since inceptions Volatility Return Source: Pictet Asset Management, GIPS, MSCI, Bloomberg, as at 31 July 2014 Pictet Asset Management | For professional investors only |

10 Investment Themes in a Global Portfolio
Advantages Constraints Thematic overlay (higher active weights in core portfolio) Simple No change in portfolio construction Unwanted biases Inconsistency of investment horizon Core-satellite approach (thematic baskets) Variable weights – themes and sub-themes Fixed weights Longer investment horizon Stronger focus Reduced biases Requires thorough knowledge of themes Requires dedicated teams Multi-asset thematics (equities, fixed income, alternatives) Bigger pool of available securities More refined risk/return profile Complexity Requires sophisticated asset allocation capabilities Pictet Asset Management | For professional investors only |

11 Check list for theme assessment
Criteria Definition Liquidity & Thematic purity Pure and liquid portfolio Feasible investment portfolio with assets > USD bn thematic purity > 20% where 50% of the assets can be liquidated in five trading 20% of average trading volumes Diversification Low overlap with traditional indices Overlap with MSCI World < 20% Expected outcome Robust & attractive risk-return profile Expected risk return profile beats MSCI World (Sharpe ratio) Theme withstands stress test through different scenarios Materiality Measurable thematic drivers with material impact on value drivers Materially accretive and measureable megatrend related impact to value drivers (growth, margins, risk premium) Pictet Asset Management | For professional investors only |

12 Investment Themes in a Global Portfolio – Passive or Active?
Megatrends known but … Megatrends are not per se value-creating (e.g. democratization) Long investment horizon = low turnover = low transaction costs Exposure to themes (“Thematic Purity”) and shifts between sub-themes are key Megatrends often implies disruptive technologies: pick winners and losers (e.g Apple vs. Nokia) … Active portfolio management is required! “Megatrends remain stable, but themes evolve!” Pictet Asset Management | For professional investors only |

13 Evolution of portfolio – Clean Energy
Thematic breakdown by fund Source: Pictet Asset Management Pictet Asset Management | For professional investors only |

14 Intersection of megatrends define thematic investment strategies
Conclusions Intersection of megatrends define thematic investment strategies Exposure to a scarce resource: secular growth Thematic investing improves risk/return profile Core-satellite approach preferred Active management required: shifts between themes and identification of thematic purity Pictet Asset Management | For professional investors only |

15 Biography Luca Paolini Chief Strategist Strategy team
Luca Paolini joined Pictet Asset Management in as Chief Strategist. Before joining Pictet, Luca worked as an Equity Strategist at Credit Suisse Securities, responsible for asset, regional and sector allocation. From 2005 to 2007, he was Investment Strategist at Union Investment. Luca started his career in 2001 at Allianz Dresdner Asset Management as a trainee then assistant vice president, covering asset allocation and investment strategy. Luca holds a Master degree in International Economics and Management from SDA Bocconi School of Management in Milan, and a Laurea Magistrale in Political Sciences from the University of Bologna. Pictet Asset Management | For professional investors only |

16 For more information, please contact
Pictet Asset Management This marketing material is issued by Pictet Funds (Europe) S.A. It is neither directed to, nor intended for distribution or use by, any person or entity who is a citizen or resident of, or domiciled or located in, any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Only the latest version of the fund’s prospectus, regulations, annual and semi-annual reports may be relied upon as the basis for investment decisions. These documents are available on or at Pictet Funds (Europe) S.A., 15, avenue J. F. Kennedy L-1855 Luxembourg. The information and data presented in this document are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments. Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to change without notice. Pictet Funds (Europe) S.A. has not taken any steps to ensure that the securities referred to in this document are suitable for any particular investor and this document is not to be relied upon in substitution for the exercise of independent judgment. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Before making any investment decision, investors are recommended to ascertain if this investment is suitable for them in light of their financial knowledge and experience, investment goals and financial situation, or to obtain specific advice from an industry professional. The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested. Risk factors are listed in the fund’s prospectus and are not intended to be reproduced in full in this document. Past performance is not a guarantee or a reliable indicator of future performance. Performance data does not include the commissions and fees charged at the time of subscribing for or redeeming shares. This marketing material is not intended to be a substitute for the fund’s full documentation or any information which investors should obtain from their financial intermediaries acting in relation to their investment in the fund or funds mentioned in this document. Pictet Asset Management | For professional investors only |

17 APPENDICES Pictet Asset Management | For professional investors only |

18 The Development of Thematic Investing at Pictet Asset Management
Pictet-Env. Megatrend Selection - Strategic exposure to Water, Clean Energy, Timber & Agriculture Leading thematic investor with over USD 20bn in assets under management 2010 Pictet-Global Megatrend Selection Exposure to all of our thematic equity strategies 2009 Pictet-Agriculture Focuses on the world’s food value chain Pictet-Timber Investments span across the full timber value chain, a scarcely researched resource of major relevance for the world 2008 Repositioned Pictet-Digital Communication Interactivity as a key driver in communication, explores opportunities of the digital world for business and individuals 2007 Pictet-Clean Energy Invests in the global energy transition, favoring carbon-free or low-carbon energy sources and energy efficiency Pictet-Premium Brands Focuses on the strong consumption trend of luxury and aspirational goods and services Repositioned 2006 Pictet- Security Invests in companies in the physical and IT security business (excludes weapons and nuclear energy) Pictet-Water The first fund to invest in the value chain of the world’s most critical resource, Water 2005 2004 Pictet-Generics A pioneering fund focusing on low-cost drug makers 2000 Pictet-Biotech The world’s first biotech-focused fund Pictet-Leisure Pictet-Telecom 1998 1997 1995 Source: Pictet Asset Management, (includes AUM from Japanese utility funds, but excludes thematic mandates) Pictet Asset Management | For professional investors only |

19 Decision parameter: Risk return profiles
Fund Start date Annualised return Volatility rf Sharpe ratio MSCI Biotech Nov-95 14.53 6.63 29.42 15.6 3.7 0.49 0.19 Water Jan-00 9.5 15.62 16.01 3.1 0.61 0.04 Generics Jun-04 10.69 7.08 16.77 15.9 2.6 0.63 0.28 Premium Brands Jun-05 10.36 6.77 22.18 16.47 2.5 0.46 0.26 Security Jan-06 8.91 4.54 16.84 17.6 2.1 0.53 0.14 Clean Energy May-07 -0.07 3.34 25.91 18.18 1.9 0.08 Digicom Jun-08 13.51 6.25 18.14 18.78 1.6 0.74 0.25 Timber Nov-08 14.58 14.42 25.16 16.53 1.5 0.57 0.78 Agriculture Jun-09 12.7 12.61 17.96 0.7 0.77 Source: Pictet, as of September 8th, 2014, in USD Pictet Asset Management | For professional investors only |

20 Digital Communication
Themes sales exposure No Geographical constraints Funds Europe North America Emerging Markets RoW* Premium Brands 30% 40% 0% Security 25% 48% 15% 8% Digital Communication 60% 20% 5% Clean energy 14% 52% 34% Agriculture 17% 43% 10% Timber 50% Water 32% 38% 26% 3% Biotech 24% 65% Generics Source: PAM, May 2014, * mainly Japan Pictet Asset Management | For professional investors only |


Download ppt "Thematic Investing Can thematic investments deliver consistent returns? FT Investment Management Summit, 17 September 2014 Luca Paolini , Chief Strategist,"

Similar presentations


Ads by Google