Insights
By: Nicholas Mandrinos
The key to thematic investment? Don’t be impulsive – Nicholas Mandrinos
The right themes can take time to blossom
One of the most challenging points to master in thematic investing is how to get a proper sense of what it means to think longer-term. Allocating capital to investment themes that are too ‘hot’ or a reluctance to wait out those themes which may take longer to mature, are some of the most common pitfalls investors fall foul of.
Investing in overvalued investment themes has obvious problems: what goes up has an uncanny habit of coming crashing down. By the same token, an inability to exercise patience can be equally as imprudent, leading investors to miss those slow burners that end up being great investment opportunities. Bill Gates was on to something when he cautioned against rushing to conclusions. “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten”, he once said.
Identifying and backing the right themes, though, is only the half the battle. Doing your due diligence and getting the underlying security selection against each theme right, including the managers you choose to work with, is just as important. When selecting investments for the Stonehage Fleming Global Thematic Investment Portfolio (GTIP), we employ exactly the same detailed research process we use for manager selection across our core portfolios at Stonehage Fleming.
For GTIP, we focus on looking at individual themes, the hierarchy of those themes and the particular way we are able to access them, in investment terms. For the team, it is a new way of thinking – constructing the portfolio through a thematic rather than a more traditional risk-based lens. In practical terms, this means allocating capital to structural growth stories we see in the market, unhindered by traditional benchmarks, geographies or sectors.
Thematic investing resonates with a particular type of client – particularly those who have already started to think of the investment world in terms of themes. Perhaps they have read about the Digital Age, Automation, Healthcare Innovation in the press and want to get involved in those broad, global megatrends. They are also prepared to stomach the periods of volatility that are likely to come with these high growth areas. Importantly they are the clients who are interested in discussing global trends and working with us on this generational journey as we mull the big ideas of tomorrow.
Nicholas Mandrinos is a Partner at Stonehage Fleming Investment Management.
Watch more from the GTIP team
Healthcare Innovation – Nicholas Mandrinos (video)
Automation – Sean Curry (video)
Digital Age – Alastair Dean (video)
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This document has been prepared for information purposes only and does not constitute a personal recommendation or advice. It does not take into account the financial circumstances, needs or objectives of the recipient and you must not, therefore, rely on the content of this document when making any investment decisions. In addition to the information provided, you may wish to consult an independent professional adviser. Past performance is not a guide to future performance. All investments risk the loss of capital. The value of investments may go down as well as up and, you may not receive back the full value of your initial investment. Issued by Stonehage Fleming Investment Management Limited (SFIM). Authorised and regulated by the Financial Conduct Authority (194382).