Vontobel study confirms European investors’ appetite for thematic investing

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Vontobel Asset Management has released the results of its thematic investing survey, which reveals that European investors plan to increase their exposure to thematic investments over the next three years.

In a survey of 300 institutional investors and intermediaries across Europe, Vontobel’s research suggests that investors’ approaches to thematic investment are evolving and maturing. Some 84 per cent of respondents have started to adopt thematic approaches in their portfolios, while 49 per cent plan to increase their allocations over the next three years. 

Already, more than half of respondents  across Europe now allocate at least 20 per cent of their equity portfolios according to a thematic approach. Furthermore, of those who do already allocate at least a fifth of their portfolios to thematic investing, 20 per cent hold 40 per cent or more of assets thematically

However, the desire for a further shift towards thematics is not shared by all. This is most evident in the UK, where 34 per cent plan to trim holdings. Vontobel’s research also shows that UK institutional investors and intermediaries currently have one of Europe’s highest exposures to thematics, with 64 per cent allocating at least 20 per cent to thematic strategies, behind only Switzerland (76 per cent), Benelux (75 per cent) and Italy (65 per cent).

This shift in sentiment may indicate that early adopters of thematic styles, particularly in the UK, may feel that some of the underlying thematic trends could have run their course. Indeed, 41 per cent of those planning to move away from thematic styles of investment say that future growth is already priced in. 

In terms of the most popular thematic themes over the next one-three years, 65 per cent of respondents said Urbanisation and Smart Cities would be a key thematic investment topic, followed by Resource Scarcity (57 per cent) and Climate Change/ESG (57 per cent). 

The study also reveals that thematic investing is not an equity-only strategy, as a significant number of respondents already apply a thematic approach across a broad range of asset classes. Respondents with larger amounts of AuM are particularly likely to have thematic exposures in asset classes like infrastructure, fixed income, commodities or real estate.

Other key findings from Vontobel’s research include:

  • 51 per cent of respondents believe that the pandemic has boosted the case for a thematic approach
  • The research also indicates that managers prefer an active approach to thematic investing as opposed to passive (29 per cent compared to 23 per cent respectively).
  • Over two-thirds of respondents expect to increase the number of external managers they use for thematic investment over the next 12 months.

Commenting on the survey findings, Sheridan Bowers, Head of UK & Ireland at Vontobel Asset Management, noted: “While covid-19 has created a huge level of disruption, many investors expect the longer term impact of the pandemic to further accelerate the underlying trends behind the themes in which they have invested. With this in mind, we would expect to see approaches to thematic investment further evolve and mature over time. For most investors, the debate is no longer about whether to invest thematically, but about how to do so most effectively.