Moneyfarm thematic investments: what are they and how can you start investing in Megatrends?

Even though the world is constantly shifting, investing remains one of the best ways to capitalise on the major trends shaping our future.

Moneyfarm is proud to introduce our new range of thematic portfolios. Through these, you can invest in some important Megatrends that are characterising our economy, with the guarantee of risk management and the ability to select from Moneyfarm’s ETFs.

Our thematic portfolios have three main points of interest for investors:

• First, we believe the themes selected have the potential to generate extra returns over the long term.
• Second, investing in thematic portfolios enables you to increase the sophistication of your portfolio, giving you the possibility of choosing themes that will align with your interests and could benefit from trends in the current and future market.
• Finally, the core-satellite approach gives you the ability to invest in a controlled risk environment. Moneyfarm’s risk management expertise will help you determine how much you can invest in megatrends without taking on too much risk.

But what exactly is thematic investing and how is the Moneyfarm offer structured? Here, I’ll unpack all the details.

Let’s start by understanding what we mean by Megatrends. Many investors have probably heard of thematic investing: but for us, the megatrend is a broader concept.

A theme could, for instance, be an emerging sector or a new technology. However, a trend is a broader change that can comprise different themes. For example: artificial intelligence, eSports and cybersecurity are three different themes but, for us, they form part of a general trend of technological innovation.

At Moneyfarm we believe investing in trends instead of themes allows our investments to remain relevant for longer, as our team annually reviews the composition of the portfolios to see if there are any themes to cut or add.

Investing by trend could also provide better diversification because the investment is not tied to the fate of a particular industry, emerging sector, or a single technology.

The main reason we have launched this range is that we believe that the shares of companies whose revenues are exposed to these trends have the potential to generate extra returns alpha over the long term.

Using a mid to long-term strategy, Moneyfarm has adopted a ‘core-satellite’ investment approach, with portfolios designed to give investors with a medium to high-risk appetite more potential alpha (excess returns) and the ability to align the investments with their own values and interests.

The options available to investors include:

• Technological Innovation: here portfolios are exposed to around 10 thematic ETFs investing in innovative industries, disruptive tech or, simply, digital technologies. These themes can include space exploration, robotics, electric cars, AI and electric batteries. These technologies are, in some cases, in an early stage of development, but have the potential to become increasingly disruptive in the future.
• Second, Demographic and Social Changes. Here investors’ funds will be invested in things like pharmaceutical research, smart cities, or luxury goods.
• And third, Sustainability. Here, the selected ETFs invest in industries active in the green transition, clean energy, or the blue economy.

For the undecided investor, our fourth portfolio adopts a multi-trend approach where investments are invested in a selection of funds chosen by our asset allocation team according to investors’ risk and return parameters.

But what makes investing in a megatrend with Moneyfarm unique? First, it’s our approach to risk. Thematic portfolios will be a “satellite’ of the investor’s core portfolio. This means that investors will be able to allocate a percentage of their capital to one or more of Moneyfarm’s thematic solutions. Our experienced team will evaluate the maximum quota that each investor can allocate to megatrends and align it to their risk profile.

Another unique feature of Moneyfarm’s multi-thematic portfolios is the process that our team put in place to select funds. The satellite portion of your portfolio will be 100% in equities through thematic ETFs. Our asset allocation team then groups them according to exposure to specific sectors or industries, subsequently categorising these thematic groups into larger trends.

Using machine learning, we analyse the content of each fund, which may highlight any overlaps and avoid an excessive concentration in a few companies or sectors. If we identify two or more funds investing in a similar theme, we then select the best using our robust selection process.

Finally, the asset allocation team selects the funds that are going to compose the final portfolios, trying to maximise the relationship between volatility and potential returns, All this comes with no extra commissions to pay.

Anyone wishing to take advantage of this opportunity can access Moneyfarm’s thematics portfolios through our App or website. Our team is available to address any questions, so feel free to book an appointment with us.