Thematics philosophy
The creation of Thematics Asset Management with six experienced portfolio managers was driven by a desire to develop specific expertise focused on a particular management style, combining both flexibility and robustness. For us, thematic investing is the best way to capture the secular growth of markets. We started from a blank page to implement what constitutes our DNA: our investment process.
We are convinced that thematic investing is an attractive way to achieve sustainable growth. At the same time, thematic investments translate complex evaluation processes into strategies that investors can understand, as we believe that investors must know what they are investing in.
Our objective is to perform the broader market by investing into specific themes that are growing faster than the broader global economy. The growth of these themes are also supported by long-term secular trends and are not based on seasonal or cyclical trends. Those themes include water, artifical intelligence & robotics, the subscription economy and safety.
Thematics Asset Management’s ESG approach
We fully integrate ESG into our process and is ingrained in our risk management methodology. Natixis AM works partnership with sustainable investing specialist Mirova, one of the European market leaders in ESG investing, to get good quality ESG data on specific companies and on our portfolio as a whole, as we also aim to provide our clients with an analysis of the portfolio’s level of impact relative to the UN’s Sustainable Development Goals (SDGs).
As strong believers in secular themes that are shaping the world of tomorrow, adopting a sustainable and responsible approach fully subscribes to our thinking. Increased urbanisation, demographics, digitalisation and rising living standards in addition to the necessity to adapt to climate change, all present investors with opportunities to benefit from new areas of growth. These are some of the long-term structural shifts that we see today and that we anticipate will continue to change the way we live and work in the future.
Given that we have a long-term investment horizon, it is essential to consider ESG factors that are likely to impact a company’s risk profile, as those risks materialise more over time.
We also believe that ESG integration leads to better informed investment decisions, helps mitigate portfolio risks and supports long-term value creation for asset owners.
At different levels all the themes that we focus on are impacted by the primary forces that shape our thinking: demographics, innovation, globalisation and scarcity.
Safety
The need for protection is deeply rooted in creating environmental security, social balance and governance, which leads to virtuous activity and sustainable wellbeing. To provide an example, climate change holds many safety implications. In the US, climate change, in addition to poor forest and land management, has intensified the drought and wildfires situation in California. More and more Californians are living in remote, fire-prone areas of the state, doing too little to make their houses and communities resilient in the face of fire danger. With human lives at stake, demand is finally increasing for technologies and services that can help people find secure locations when their lives are threatened..
Water
With the water theme, we invest in business models that provide water to cover agriculture, industrial, residential, commercial and municipal markets. With water being a life-sustaining resource, it has continued to be one of the longest secular growth theme. There is nothing esoteric about the delivery of water to its end user; it requires the resource itself, energy, but above all, infrastructure. Physical assets are crucial in delivering and reprocessing the world’s most precious, but perhaps most underappreciated resource.
Subscription
If you have taken recently a hard look at your credit card statement, it is most probable that you’ll find a few monthly or perhaps even annual subscriptions to a range of services that you use regularly. You will most likely recognise that you are paying for a video or music streaming service, but you can be pretty certain that these are not your only subscriptions.
Over the last decade, we have seen a constant and steady increase in the number of industries and companies that use subscription services to monetise their offering and and have become successful in it. The business model is quite easy to understand. Instead of creating a hit product that will be ‘sold once’, subscriptions offer customers more personalisation and access to new and exclusive content. Companies end up building stronger relationships with their customers, with successful companies enjoying high renewal rates – and this matters a lot. High renewal rates essentially lead to better revenue visibility (if every consumer renews at the same price, revenue will be at least as high as in the previous year), which in turn means that the company can commit capital to research and development spending with more confidence, offering additional and better services to customers.
Businesses that have adopted subscription-based models also enjoy recurring revenues that are highly predictable. With a predictable revenue stream, expenses can be budgeted more precisely, and R&D usually becomes a huge beneficiary.
The subscription theme can be seen in various industries, including telecommunication, media, software, utilitities and healthcare sectors.
With supporting demographic, technological and sustainability drivers in place, we believe the subscription economy is poised to see further, accelerating growth. Consumers and corporates increasingly see it as a model that is a better fit with their consumption patterns. At the same time, vendors also benefit from the model in several ways and are keen to offer more of their services under subscription. We are convinced that subscriptions will be applied to more services in the future while their utilization will also increase.
Portfolio managers:
Matthieu Rolin
Senior Portfolio Manager at Thematics Asset Management
Nolan Hoffmeyer
Senior Portfolio Manager at Thematics Asset Management
