«Thematic management is a triptych that combines profitability, meaning and consistency»
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Investment in megatrends was the protagonist of a re One hundred organized forum ABC and Funds Society. Vaha Ahmandi, director of Thematic Variable Income of CPR AM, of the Amundi Group, analyzes in this interview the keys to take into account and the advantages of this increasingly booming investment type.
-What are the main attractions of the thematic investment compared to the traditional one?
-Thematic management is a triptych that combines profitability, meaning and consistency. This answers three questions that investors focus on. First, according to a study we conducted on the performance of thematic funds for 15 years, they have generally outperformed the markets in both net and gross terms. Therefore, they respond well to the first requirement of investors in terms of profitability, something that does not occur systematically in traditional management. In terms of risk, thematic investment offers diversification, deviating from traditional benchmarks. Second, the thematic framework, which seeks to identify the fundamentals that drive an action, is more relevant than the traditional approach, which focuses on the fact that an action belongs to a country or a sector. Third, thematic strategies provide a way to align investment with each other's convictions. Responsible investment makes a lot of sense in thematic management, where megatrends and sustainable development share the same long-term vision.
-What new themes is Covid-19 promoting?
-Sustainability issues must come out reinforced, echoing the numerous discussions about a remodeled post-pandemic economic system and the many opportunities to reinvest in more structural decarbonization projects that will create economic activity, jobs and a better climate and environmental footprint.
The social dimension of responsible investment should gain more ground as the severe economic disruption linked to the pandemic has made social inequalities even more evident and have widened. Companies that display misconduct or poor awareness of social issues may face increased regulatory, political, and reputational risks, which are likely to materialize in financial valuations.
More generally, I believe that the pandemic will enhance impact funds, as investors will be more predisposed to achieve through their investments a positive and concrete improvement in social issues and environmental challenges. A few weeks before the crisis, we launched a fund called Social Impact that selects global listed companies that contribute to reducing inequalities in the countries where they are established, and report on a series of indicators that reflect different aspects of inequality. I believe that this type of fund will satisfy investor demand after the crisis.
-Why Amundi bets on investment in disruption?
-The pandemic and the global blockade measures provided fuel for the growth of the «New Domestic Economy». Thanks to a diversified approach that offers a single point of access to around 30 disruptive subtopics, our Global Disruptives Opporutnities fund has been able to capture changing market segments and increased home activities.
We see the current market environment more as an opportunity than as a threat. Although we do not expect significant gains in the markets in the medium term, there is potential to increase our exposure to companies with attractive valuations, leaders in their markets and that can emerge from the crisis with a competitive advantage, increasing the value for long-term investors.
-Is aging a safe investment bet?
-It is one of the most significant demographic transformations of this century. More and more sectors will be driven by spending by seniors, since these consumers with the highest wealth are those with the highest growth rate of spending among the population. With more free time and disposable income, industries such as health, social care, leisure and travel are benefiting significantly from growth in this consumer segment.
-How does the investor respond to this type of products offered by the market?
-A strong development of thematic investment had already taken place before the pandemic. We have not seen refunds so far since the pandemic started. On the contrary, we have seen positive flows. Recent data shows that actively managed open-ended equity funds in Europe recorded € 35bn outflows in the first quarter, while thematic equity funds captured net inflows of € 14bn.
- How to know that it is not a passing fad?
We do not yet know the scope and consequences of the massive shock that the global economy has experienced as a consequence of the health crisis. The pandemic will likely confirm the importance of a long-term and forward-looking approach.
