This page best explains my investing philosophy: Taking a Thematic Approach to Investing

Theme investing goes beyond simple asset allocation. It entails looking at the world around us, and asking ourselves: what are the bigger structural trends in world society, politics the economy and financial markets, what themes are likely to drive markets over the next years and how can I best position myself for those today? Theme investing is an investment approach where investors identify trends from a top-down angle, find themes that fit within that trend and then identify investments that will benefit.

Theme investing is not the same as passive investing, yet it is not the same as active investing either. Rather than picking individual companies, we are picking broader market themes that are much easier discernible than whether specific companies will fare well or not. Who could deny globalisation, for instance? The themes I discuss can be societal, geopolitical, technology-related or financial and economical. If the themes play out over the longer run, you should be able to generate strong returns.

On Portfolios for Thematic Investors, I post about anything and everything related to investing, but most importantly I outline these themes – like water, tourism or rising interest rates – and link them to assets you can easily invest in to get exposure to them.

You can then use these sub-portfolios as building blocks in your personal asset allocation process, by either building  a portfolio full of them, or adding them as an additional allocation in your existing portfolio (an idea could for instance be to have a 33% traditional bonds allocation, 33% equity and 33% themes).

For every subportfolio I:

  • Indicate a percentage range that I’d suggest to allocate to them
  • Make an (entirely subjective) assessment of how likely a theme is to play out
  • Give you risk statistics like ex-ante volatility and Value at Risk
  • Give you several relevant stress scenarios (e.g. how would a theme portfolio have played out if 2008 happened again?)
  • And finally I follow through their performance as we move ahead and compare that to a total world stock index for benchmarking purposes

Most portfolios will consists of some combination of stocks, bonds and ETFs. Given that most of my readers will not be professional investors I will largely stay away from derivatives. Thankfully however, an increasing amount of niche ETFs allow regular investors to get derivative-like exposure in their portfolios whenever required (think inverse bond and stock ETFs or long and short currency ETFs) so we don’t end up too far off from what the pros can achieve.

On the Portfolios page you can check out all themes with their stated diversification strength, yield and risk characteristics. Performance analyses their returns.

For inspiration only…

All of these portfolios are just high level ideas, giving you food for thought in terms of where to allocate. Obviously, if I suggest that part of a portfolio should make use of a specific energy ETF, you can actually fill up that allocation with many similar products. You could even replace it with energy-related stocks. The point is that you should have some energy exposure there to hedge against the theme playing out.

So who am I and why am I doing this?

I have been working for some of the larger banks and global asset management firms for well over a decade now. I have worked in risk management, quantitative and front office jobs in several different global locations, helping to manage equity, fixed income and multi asset portfolios throughout the years.

During the week I am behind my Bloomberg terminal analysing/constructing portfolios and booking trades, while in my free time I am determined to share some of my investing knowledge and thinking with you. For what it may be worth.