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Natixis brings thematic funds to Singapore

The Monetary Authority of Singapore has given the Paris-based asset manager approval to sell four Ucits products to retail investors.

All four funds were first launched late last year as Luxembourg Ucits. They include the Natixis Thematics Meta Fund, Natixis Thematics Safety Fund, Natixis Thematics Water Fund and the Natixis Loomis Sayles Asia Bond Plus Fund.

The largest is the Thematics Safety Fund with $327m of assets, and the smallest is the $38m Loomis Sayles Asia Bond Plus Fund.

The best performing of the three thematic products so far this year is the safety fund, which has fallen -2.67%, followed by meta (-5.76%) and water (-12.45%). Although none of them have designated benchmarks, they have all done better than the MSCI World index (-14.30%) and the average return of the broadly inclusive international equity fund category (-13.31%), according to FE Fundinfo data.

The safety fund invests in companies that offer products and services for the physical and digital protection of individuals, businesses and governments, and the water fund buys stocks of companies involved in water demand management and pollution control, as well as in water infrastructure companies, according to their factsheets.

The meta fund combines all theme strategies managed within Natixis’s “thematic franchise”, which in addition to the safety and water products includes the firm’s artificial intelligence (AI) and robotics fund.

The latter is one of 17 Natixis funds already available to the Singapore retail market.

The $140m AI and robotics product has a cumulative return of 29.4% since its launch in December 2018, less than the average 37.3% achieved by its technology fund peers.

In a recent webinar, Esty Dwek, Geneva-based head of macro strategy for investment solutions at Natixis Investment Managers, argued that healthcare and technology companies globally are the “obvious structural winners” from Covid-19, but she made no predictions about the likely future performance of other thematic sectors.

However, Dwek expects bond and equity markets in Asia to do better than other regions, as China, in particular, recovers fastest from the pandemic.

The Natixis Loomis Sayles Asia Bond Plus Fund is down 11.3% so far this year, compared with -5.01% for its Asia-Pacific fixed interest sector average and has also posted a worse return than the the widely-followed JP Morgan Asia Credit index, which has drooped -1.84% for the year to 4 May.

At least two-thirds of its assets must be invested in US-dollar denominated debt, but up to a third can be allocated to regions outside Asia as long as they are part of China’s belt-and-road initiative, and there is no restriction on credit rating exposure, according to the fund’s factsheet.

Thematic trends

A Morningstar report published in February found that thematic funds have been popular among fund investors in Asia, with technology-related themes such as robotics, artificial intelligence, big data and robotics gaining traction in recent years.

There are 20 active and passive thematic funds domiciled in Hong Kong or Singapore, according to Morningstar data. These include four products managed by Mirae, three by UOB, two each by Deutsche and Premia Partners and one fund each managed by Allianz GI, BEA Union, China AMC, EFG and Nikko.

However, the five largest thematic funds available in Singapore (and Hong Kong) are managed by Pictet Asset Management, which also dominates the sector in Europe. Its multi-billion dollar products focus on investments in robotics, automation, big data, cybersecurity, robotics and broad technology themes.

The collective AUM in thematic funds worldwide nearly tripled to about $195bn from $75bn during the three years to 31 December 2019, representing 1% of total global equity fund assets. There were 154 new thematic funds launched last year, bringing the total to 923, according to a Morningstar report.

However, Wing Chan, Morningstar’s director of manager research practice for Emea and Asia, told FSA previously that the long-term performance figures for thematic funds in general are unflattering, and investors tend to switch out of funds when the themes lose their shine, resulting in high turnover.

For instance, only 45% of all thematic funds launched before 2010 survived a decade later, and of those that survived, just a quarter outperformed the MSCI World Index over that 10-year period, he noted.


Natixis Thematics Meta, Safety and Water Funds vs MSCI World Index* and international equity fund average**

Source: FE Fundinfo. Returns in US dollars. *None of the funds have official benchmarks. **Generic sector comparison.

Part of the Mark Allen Group.