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Why active thematic investing trumps the passive approach

Why active thematic investing trumps the passive approach

Of all the investment strategies and instruments, the thematic approach is one of the most demanding—but it’s also an approach that, done correctly, offers potentially exceptional performance.

Passive investment strategies make sense if the investment focus is established enough to define straightforward criteria like index participation, industry sector allocation, ESG ratings, or revenue lines. Successful examples range from funds replicating the S&P 500, or thematic indices on robotics, or renewable energy.

But due to their regulatory nature, these passive, index-based strategies limit your ability to find alpha among innovation and themes that drive change across markets, industries, and geographies.

Industry sector classification or black-box ESG scores simply don’t provide the granularity and timeliness you need to capture investment opportunities and performance drivers from a truly thematic perspective.

Mutual funds and ETFs with active management enable investors to turn deep thematic expertise into an ideal selection of alpha-generating securities. The continual renewing and fluid nature of market trends and themes means portfolio managers need to be able to strike in the moments of greatest opportunity.

And if you’re an Asset or Wealth Manager, you’ll be more than familiar with the continuous process (and struggle) of finding quality research that can robustly underpin thematic asset allocation.

External pressures (clients demanding more customisation, public scrutiny on responsible investing) and internal pressures (process inefficiencies) are making thematic investing a vital yet painful strategy for investors.

The good news is that it’s now easier than ever to take an active approach to relieve these pressures, capture relevant data and ramp up performance. We call it Thematic Intelligence.

Actions speak louder

An active approach to thematic investing drastically improves your ability to improve performance and effectiveness.

After all, the upsides are seriously appealing. And while investment instruments are based on future stock performance, Thematic Intelligence means investors can capture relevant, nuanced and otherwise hidden insights efficiently and effectively.

Not only is fundamental and quantitative data available to everyone (making differentiation impossible), but more importantly, neither data set is thematic. As a result, research analysts spend huge amounts of time and effort to make up for these missing insights.

Thematic Intelligence enables them to capture insights with the granularity needed for differentiation, while keeping research efficiency high.

These insights allow you to capitalise on genuinely innovative businesses of today and the future. Crucially, they also free you to act independent of traditional industry sectors and standard data—which is both effort heavy and only accessible to those who already deeply understand a particular theme.

An active thematic investment approach also empowers you to invest in equities that match yours or your investors’ values and preferences. With increased focus on Environment, Social and Governance (ESG) factors, investors now care deeply about the wider impact of their investment behaviours.

Taking an active approach to thematic investment allows your researchers to deepen your understanding and maximise your ability to exploit specific themes or trends that chime with your investors’ interests.

Thematic Intelligence also allows investors to invest in themes that grow faster than the wider economy. You can unlock deeper insights that point to underlying drivers of greater performance—allowing you to screen for and invest in thematic equities that have more chance of generating stronger returns.

Researchers and asset managers need to continuously find, evaluate, ingest, and integrate insights from every available information source – including unstructured data.

All of these potential benefits are linked by a common thread: efficient insights. Your ability to capture relevant thematic insights directly impacts your rebalancing efforts and portfolio construction—you need a consistent, efficient and up-to-date process.

Getting active just got easy

We designed the Affinity platform to make active thematic investing simple yet effective for Asset and Wealth Managers.

Our Thematic Intelligence platform allows Asset and Wealth Managers to create new investment strategies, energise existing ones and create new products quickly, easily and in near real time.

Its web crawler AI removes the research drudgery by finding, filtering, ingesting and ranking thematic investment opportunities from 45,000,000 unstructured data points per year. And by using Affinity in tandem with “traditional” terminal data, you can ingest a continuous stream of thematic insights and use it as an end-to-end portfolio construction tool.

If you want to drive better thematic processes, capture higher-quality insights, and build more powerful and bespoke products, faster—then we should talk.

Ready to start?

Let’s talk.


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