The economy is slowing down all over the world, making the work of investors more complex. In the absence of economic dynamics, we must therefore look for structural growth, banking on long-term trends. This is precisely what thematic funds exist for.
The problem is that there are now too many of them. We therefore asked the three largest managers of these products in Europe (according to Morningstar) to each present to us their preferred theme and its variation in terms of investment support. We have also selected some good quality variants from other suppliers on these same themes.
Pictet AM: preserving the environment
The theme. “The environmental transition is the main structural trend currently at work,” assures Hervé Thiard, Managing Director of Pictet AM France. For companies, the challenge is immense because they must evolve towards an economy that respects natural resources and ecosystems while meeting the needs of human beings… and generating financial performance! The path is arduous, but the movement seems irremediably underway. Awareness dates back to the Paris Climate Agreement in 2015, which established an ambitious objective: limiting global warming to less than 2°C compared to the pre-industrial era. Since then, many states have launched plans to finance this revolution. The Green Deal for Europe plans to release 1,000 billion euros over ten years to achieve carbon neutrality.
The bottom. With 7.6 billion euros in assets, Pictet Global Environmental Opportunities is one of the management company’s behemoths and also its most comprehensive support for environmental issues. “In this fund, we have adopted a global approach which integrates greenhouse gas emissions, pollution of the oceans and the atmosphere, the loss of biodiversity and the artificialization of soils,” indicates Hervé Thiard. The manager selects companies whose activity creates the least possible damage to the environment and those whose products and services allow the entire economy to limit its negative impacts, such as manufacturers of efficient electric batteries. It targets profitable stocks, characterized by a reasonable level of debt and stable cash flows, with a bias towards innovative companies.
Other materials on the same theme: Dorval European Climate Initiative (Dorval AM), CM-AM Global Climate Change (Crédit Mutuel AM), Mandarine Global Transition (Mandarine Gestion).
CPR AM: Green hydrogen
The theme. As part of the energy transition – which aims to reduce the use of fossil fuels – hydrogen complements the key role played by electricity as an energy that does not emit carbon. “The electricity produced by solar and wind power is intermittent and geographically localized. This is not the case for hydrogen,” underlines Alexandre Cornu, manager at CPR AM.
The market is still modest, but in full expansion since it should be multiplied by 7 by 2050 to reach 500 million tonnes per year, or 17% of global energy consumption. We still need to develop green hydrogen, the production of which is not polluting, unlike that of gray hydrogen, obtained from fossil sources, such as natural gas or coal. “At the same time, uses will multiply, particularly in industries such as steel, chemicals, cement or glass as well as heavy and long-distance transport,” notes Alexandre Cornu. Many States have already planned to invest in order to develop the sector.
The bottom. Launched at the end of 2021, CPR Invest Hydrogen invests across the entire green hydrogen value chain. This initially represents 300 values, knowing that extra-financial filters (related to environmental, social and good governance criteria) eliminate around a hundred. “Our universe includes both very large, mature companies, which find a source of growth in hydrogen, and small players who are developing crucial equipment for the sector,” relates Alexandre Cornu. This combination makes it possible to limit the volatility of the fund where other supports focus on the second component. In detail, the portfolio is based on four pillars: the production of renewable energies, critical equipment for the development of the sector, hydrogen producers and transporters and finally its users. “We target those who invest to decarbonize their industrial tools,” explains Alexandre Cornu. By construction, the fund therefore has a significant industrial and cyclical bias.
Other materials on the same theme [1] : BNP Paribas Easy ECPI Global ESG Hydrogen Economy UCITS ETF (BNP Paribas AM), L & G Hydrogen Economy UCITS ETF USD (Legal & General IM)
BlackRock: the technological revolution
The theme. Omnipresent, technology has become a super sector that powers all the others. It is today the most important field of activity in the world, with no less than 2,600 companies listed across the planet for a total capitalization valued at $32,000 billion at the start of the second half of 2023. It also represents more than a quarter of the American S&P 500 index. “As technology is at the origin of the main innovations, investing in this sector provides access to drivers of disruption”, underlines Ivana Davau, head of the Wealth activity for France at BlackRock. It is in fact crossed by major trends, the most recent of which are artificial intelligence, the transport of tomorrow and the Internet of Things.
Identifying the winners, however, is no easy task. Thus, if the Nasdaq (the index of American technology stocks) increased by 32% over the first six months of the year, the increase was concentrated on a handful of stocks. “In these conditions, active management makes sense,” believes Ivana Davau.
The bottom. Very diversified, the BGF World Technology Fund invests in both small and very large capitalizations. He also participates in certain IPOs. “It aims for a balance between large, well-established players and still emerging technologies,” says Ivana Davau. As a result, the average capitalization of the fund is lower than that of its benchmark index (the MSCI All Country World Information Technology Index).
The management team uses its own methodology to map the investment universe. “It does not use the sectoral nomenclature traditionally used because the latter may not take into account innovative companies which disrupt traditional sectors such as automobiles,” points out Ivana Davau. As a result, the fund can hold securities on the border of two sectors, such as Tesla in automobiles or Mastercard in payments. Regardless, the manager selects companies with solid growth prospects. The fund has a strong geographic bias in favor of the United States, which represents more than three-quarters of the portfolio.
Other materials on the same theme: Threadneedle Global Technology (Columbia Threadneedle Investments), JP Morgan US Technology (JP Morgan AM), FF Global Technology Fund (Fidelity International).
All-in-one funds
Thematic management allows you to add a very specific color to your fund portfolio, by targeting one or more investment themes according to your convictions and sensitivity.
However, it is not easy to select the products as the offer has multiplied in recent years, going from the aging of the population to the metaverse. To combine several themes with a single vehicle, some companies offer composite supports. The largest of these is the Pictet Global Megatrend Selection fund (from Pictet AM), which integrates 12 investment ideas. Other options: Allianz Thematica (managed by Allianz Global Investors) or CPR Invest Megatrends (from CPR AM), knowing that these are limited to the expertise of their house. Other funds, such as Galilée World Equity Thematics (Galilee AM), review the entire market offering to invest in the most promising funds.
Finally, it is also possible to access a few rare diversified products. BNP Paribas Multi-Asset Thematic, from BNP Paribas AM, is one of them. It draws on various internal and external expertise and includes a third of green bonds, financing ecological projects.