How institutional investors can allocate to thematic investments

Thematic investments might make sense for investors of all stripes, especially when considered in the context of the wider portfolio.

We have found that for an institutional investor managing across multiple asset classes:

• The global economy is facing a set of disruptive changes, resulting in thematic investing being an important additional way to generate alpha, particularly in a low interest rate environment.
• Thematic ideas can overlap each other in terms of the risks to which they are exposed (especially the exposure to the growth factor), and also to the existing portfolio. Institutional investors may need to consider how to adjust their existing portfolio (if appropriate) to ensure risks are being taken where intended.
• However, we believe that it is currently inappropriate to set a strategic asset allocation using themes rather than a traditional approach.
• Good governance is crucial. For many institutional investors, this will be the most difficult part of deciding whether to include themes in their approach.

Find out more in our full paper below.