Exploring Our Thematic Approach

At Newton, we believe there are certain key factors that will be instrumental in shaping the investment landscape over the coming years.

As investors, it is our job to cut through the noise and make sure that we spend our time focusing on these factors, as we believe this puts us in the best position to identify opportunities and manage risks.

We capture these ideas in a number of investment themes, which are then used by our strategies to inform stock selection.

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Thematic Investing: What It Is and How We Do It

We explain how we currently use themes in our investment approach.

Which Themes Have We Chosen?

We use nine core themes: net effects, smart revolution, Earth matters, financialization, state intervention, China influence, consumer power, population dynamics and healthy demand. We see these themes, which include the disruption from technological change, the increasing power of consumers, the impact of climate change, and the influence of China, as indicative of long-term, structural trends that are likely to persist for some time.
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The Case for Thematic Investing

Why we believe using themes to guide an investment process can help to deliver long-term sustainable returns.

Why Do Themes Matter?

In seeking to decipher opportunities from risks, investors have a very large universe to look at, and it is unrealistic for an investment manager to analyze the whole of it (and the almost infinite influences upon it). It is easy to get distracted by short-term noise, worrying about what the market will do week to week, or even day to day.

  • Instead, we want to consider the trends that will shape the world of investment, and avoid being distracted by market noise. Our themes are therefore intended to provide perspective and allow our global research analysts and portfolio managers to focus their time on the areas of greatest importance. They:

    •   represent the first stages of idea generation and risk management
    •   identify drivers of long-term, structural change
    •   provide a dynamic framework for investment thinking
    •   afford a longer-term global perspective on a volatile world

How Do We Use Themes?

Consumer powerThemes are used throughout our investment process, facilitating both our top-down and bottom-up idea-generation process. From initial, high-level research prioritization to portfolio construction, themes play an essential part in helping to shape our investment outlook and positioning. Employing themes in our investment process not only alerts us to potential opportunities, but also serves to highlight possible risks.

Our Nine Core Themes

To find out more about each theme in detail, and the ideas within these core themes that we are currently focusing on, please click on the icons below.

Earth matters Consumer power Population dynamics China influence Net effects Healthy demand Smart revolution State intervention Financialization

The evolution of our themes

Of course, our themes are not fixed areas of focus. As the world evolves, our core investment themes evolve too. The graphic below shows how our themes have developed over the years to result in the nine we consider today.

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Thematic Investing: What It Is and How We Do It

Our new paper reveals the most common questions our clients ask us about thematic investing……and the answers.

  • What is a theme?
  • Why do themes exist, and how do we know they exist?
  • Do themes affect company returns?
  • What are the key characteristics of themes?
  • How does Newton use themes?