Continuing with the subject of investing with very little effort vs stock picking discussed in the threads Father vs Son 2020 and What is your benchmark?, I’ve noticed that thematic funds based on “megatrends” seem to be gaining in popularity. Are these a good long term passive investment strategy or should investors be wary of clever marketing with fund providers spinning a believable narrative in the interests of selling more funds rather than achieving better long term performance (the once popular BRIC themed funds come to mind).
According to BlackRock these are the main megatrends:
|Shifting economic power||Asia, and specifically China will become the centre of the global economy.|
|Technological Innovation||Digital transformation, cyber security, gaming, online shopping etc|
|Climate change / sustainable future||Renewable energy, electric vehicles, sustainable materials, food and water supplies.|
|Shifting Demographics||Process automation (e.g. robotics), healthcare innovation|
|Rapid Urbanisation||Infrastructure, consumer growth|
There’s a wide variety of funds to choose from in the different sectors, some of which seem quite specialist/abstract/obscure. I’m not sure for example how I would evaluate the investment potential of the iShares “Inclusion and Diversity” [OPEN] fund which is offered under the banners of shifting demographics and shifting economic power.
Having said that, anyone invested in the more generic themes of say technology, China, or renewable energy would likely have enjoyed pretty decent returns in the last year as these themes emerged as some of the big winners from the global response to the pandemic.
Are megatrends a long term investment strategy for the passive investor or just the latest thing? Are you investing thematically and which themes are you backing?