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
- STOXX Thematics Annual Review Report
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.
Related news & research
Q&A: New Eurex futures on STOXX Semiconductor 30 index as investment vehicle into dynamic sector
Eurex’s Mezhgan Qabool explains how demand to invest in chipmakers drove the launch of the STOXX Semiconductor 30 index futures in March, and what the new product offers for portfolios.
STOXX Thematic annual rebalance shows themes evolvement
Eight STOXX Thematic indices underlying ETFs in Europe had their annual rebalancing in June, with six of them seeing updates to the business sectors associated with the targeted theme. The ‘purity’ ratio, or theme-related revenue, remains above 80%.
Monthly Index News: June 2024
US stocks rose in June as investors weighed the prospects for interest-rate cuts amid slowing inflation. European shares fell as results from the European Parliamentary elections increased political risk.