How would you describe the team’s approach to investing
Our initial consideration when approaching an investment is whether a business is a natural beneficiary of the ‘primary forces’ which we believe to be the perennial root causes of global disruption – namely demographics, innovation, globalization and scarcity. We believe that thematic focused portfolios are ideally positioned to be long-term beneficiaries of the secular growth drivers that arise from these far-reaching transformative shifts. So, we look to identify a broadly diversified group of mis-priced investment opportunities in the equities of companies that participate in their theme-specific market segments. These market segments have witnessed growth rates superior to that of the broader global economy due to the long-term secular growth themes which underpin them. Another important aspect is to focus on companies that also meet non-financial criteria relating to socially responsible management and ESG considerations.
Which market segments or themes do you focus on?
Our expertise is in three key areas: AI & robotics, safety and water.
Take water, for example. Our strategy seeks to identify investment opportunities in the companies participating in the provision of ’water infrastructure’, ‘pollution control’ and ’demand efficiency’ products and services.
Water is a basic need, not only for human life but also for economic development. It is a limited resource with growing demands placed upon its provision to sustain demographic and economic growth.
With the increasing need to treat or transport water where it is required, and collect it when used to avoid cross contamination, demand is increasing for the provision of technologies and services to deliver the required quantity and quality of water. The companies participating in this market therefore stand to benefit from its potential growth. We believe that the ever-growing water service industry represents a large, diversified, attractive and differentiated investment opportunity.
As for the automation and technological improvements brought by AI & robotics, they are changing in new and unforeseen ways how we live, interact and do business. This is occurring through the combination of significant advancements in performance capabilities and rapidly declining costs in key enabling technologies. And, as AI & robotics is a ‘general purpose’ technology that is growing exponentially rather than linearly, use cases are already many and growing – from opportunities in industrial automation and healthcare to office tasks and consumer services.
Likewise, the technology rapidly changing our world also creates new risks to the safety of individuals, communities, industries and nation states. As new threats emerge to this basic need, new steps will be taken to mitigate them. That creates a huge opportunity to invest in those market participants that will be on the forefront of the changes in safety.
AI & robotics, safety and water are all ‘themes’ that are becoming more prevalent in every aspect of our daily lives, with each one benefiting from long-term global trends in demographic, environmental, technological or lifestyle factors. We believe they each represent a potentially attractive and differentiated investment opportunity.
Why are you the best team to rise to these challenges?
In short, it’s because of the strong experience and track record of our portfolio managers and the industry-specific knowledge, network and connections that they bring to the table. Arnaud, Simon, Karen, Frédéric, Nolan, and Matthieu are well known and well respected in their specialist fields, with an average of over 10 years of thematic investing – in some cases at more than one previous organisation.
Prior to joining Natixis Investment Managers, these managers were part of an extremely well-known and successful thematic franchise. Over time, they have developed and launched a range of thematic funds and together have been involved in the management of more than $21 billion.
How does a thematic approach differ from traditional portfolio construction?
It is unconstrained, so it breaks out from the grid-like method of asset allocation. The search for new drivers of growth takes ‘thematics’ beyond geographical boundaries, style biases and market capitalisations, and it cuts across traditional sector classifications of equities. The strategic insight within the team allows us to identify emerging and potentially rewarding investment trends, while our analytical expertise means that we can essentially interpret the same information differently.
This differentiates thematic investing from traditional stock-picking. We are benchmark agnostic, breaking away from market-cap weighted indices – which give more weight to companies and industries that have won in the past – and focusing instead on the winners of tomorrow. Our investment horizon is therefore inherently long term.