Adding thematic equities to diversified portfolios

Marketing communication
 

Thematic equities are mainstream investments that investors can incorporate into their portfolios whatever their asset allocation framework.
 

Growing popularity

They were once considered niche. But thematic equities have in recent years evolved into mainstream investments. Their ability to transform broad, long-term macro-economic, technological and ecological trends into investments has struck a chord with a growing circle of investors. 

Even so, questions remain over how to incorporate such stocks within portfolios that use traditional asset allocation frameworks.

In 2019, Pictet Asset Management provided some preliminary guidance on this matter, drawing on well-established portfolio construction concepts and portfolio optimisation tools. 

The purpose of this update is two-fold. First, we wish to incorporate revised capital market assumptions into our analysis. Second, the report is an opportunity to explain our evolving thinking on the inclusion of thematic strategy combinations as core portfolio holdings.

In our view, thematic equities can be incorporated into diversified portfolios using any of three broad approaches. Thematic equities can function as:

-  Satellite allocations within a core-satellite framework

-  Investments within a global equity asset allocation

-  Alternatives to fully diversified equity portfolios
 

Download paper  to explore insights on adding thematic equities to portfolios.
 

Authors

Steve Freedman , Sustainability and Research Manager

Steve Freedman joined Pictet Asset Management in 2019. He is head of Research and Sustainability for Thematic Equities and also chairs the Thematic Advisory Boards. Before joining Pictet, Stephen was at UBS Wealth Management, where he most recently served as head of Sustainable Investing Solutions for the Americas, based in New York. Prior to that he served in various Investment Strategy roles, including head of Thematic Investing Strategy and head of Tactical Asset Allocation. He started his career with UBS in Zurich in 1998 as an economist and public policy analyst. Since 2018, he has been teaching environmental finance at New York University. He was also the founding co-chair of the Columbia University Seminar on Sustainable Finance from 2016 to 2019. Stephen holds a Doctorate (PhD) and a Master in economics from the University of St. Gallen. He is a CFA charterholder and earned the FRM designation from the Global Association of Risk Professionals.

Gillian Diesen , Senior Client Portfolio Manager

Gillian Diesen joined Pictet in 2015 and is a Product Specialist in our Thematic Equities team, responsible for the Nutrition, Premium Brands and Timber strategies. Prior to assuming her current role in 2018, she was an Alternative Investment Specialist with a focus on Strategy, Marketing and Project Management at our Pictet Alternative Advisors entity. Before Pictet, Gillian spent over five years in Abu Dhabi working in strategic planning and business development roles at Family Offices and Government-related entities including Miral Asset Management, Mubadala Development Company and National Holding. She began her career in 2006 in the European Parliament as a Political Advisor looking at foreign policy and political strategy. Gillian holds a BA and MA in Modern History & Politics from the Queen's College, Oxford University. She also holds an MBA in Management from IMD. Gillian is CAIA qualified.