Global Thematic Equity is an unconstrained strategy that seeks opportunities created by secular trends over a multi-year time horizon. There are long-term secular trends that stem from economic, demographic and technological changes that are powerful enough to influence corporate performance across multiple industries. We seek exposure to these tailwinds and the long-term capital appreciation they can provide.
Four core tenets drive the strategy:
- The economic or technical change must be big enough to influence the bottom line of companies in multiple industries. The team intentionally looks for secular themes and disruptive changes that span multiple industries, as this is where the market can miss opportunity. Analysts are organized by theme, not industry or region, which allows them to think about themes holistically and cover all related stocks.
- The secular change should create meaningful profits that industry leaders can defend over time. A focus on the impact to corporate performance is designed to distinguish between a trend and a potentially profitable investment theme. There are many profound changes occurring around the world, but most of those changes are trends that may not qualify as investment themes.
- The potential theme must be investable. There must be enough publicly traded stocks with sufficient liquidity that the team can invest at least 5% of the portfolio. The team seeks scenarios where the market should begin to discount the profitability of the change or disruption within three to five years.
- Multi-theme portfolio construction is important in risk management. A single-theme strategy would not achieve appropriate diversification, or would hold companies tangentially related to the theme, which brings unintended risk and dilution of the research process.
The strategy combines top-down secular and cyclical views with fundamental, bottom-up research. The research process includes thematic idea generation, proprietary theme-level analysis, fundamental company analysis and a macroeconomic overlay. Proactive risk management is incorporated at all stages of the research and portfolio construction process, at the individual holding level as well as at the portfolio level.
