What is thematic investing?

Thematic investing means that your investment strategy is focused on long-term megatrends rather than on picking individual companies or sectors. The aim is to capitalise on opportunities created by global megatrends. Examples of such themes could be anything from disruptive new technology to the rise of a new middle class in emerging markets.

Why thematic investing? 

Right now, solving global sustainability challenges appears to be a theme that could prove profitable in the near future. This gives investors a unique window to address these challenges and at the same time to invest in trends with a strong potential for excess return. Thematic investing also allows you to invest in areas you’re particularly interested in.  

What are megatrends? 

Individual structural shifts can be grouped into broader trends which can, in turn, be grouped into even larger megatrends. These large megatrends represent significant socioeconomic shifts, affecting us all. Megatrends differ from one another, as they have different focuses and they develop at a different pace.  This opens up plenty of investment opportunities. 

Nordea’s three megatrends to look out for 

We at Nordea have identified three overarching megatrends that are shaping the world, and we offer a selection of funds or ETF’s for each theme: 

  • Technological Transformation 
  • Sustainability Challenges 
  • Demographic and Social Change

Technological Transformation

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The Technological Transformation megatrend is closely related to the fourth industrial revolution and encompasses technologies such as autonomous vehicles, 3D printing, nanotechnology, the internet of things (IoT), artificial intelligence (AI) and cloud computing. This megatrend also boosts the development of digital platforms, enabling network-based business models such as Airbnb and Uber. Technological Transformation is often signified by rapid and non-linear change which can be misunderstood by investors, creating interesting investment opportunities.

Sustainability Challenges

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The world is faced with several sustainability challenges that require swift solutions. These challenges are so broad that they easily make up their own megatrend. Driving forces behind this megatrend are the growing scarcity of natural resources, increased environmental awareness and increased regulation, which serve as a vital catalyst for change. This megatrend is driving many changes, from more sustainable food production to cleaner energy systems and more efficient use of materials.

Demographic and Social Change

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Demographic and Social Change is a diverse megatrend, defined by an ageing global population, new generations of digital natives and a rising middle class in emerging countries, such as China and India. These seismic shifts affect consumption patterns and present both challenges and opportunities. Trends related to demographic shifts are usually predictable and play out slowly. That’s why investors don’t always understand their long-term economic ramifications.

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