Investing for growth: It's trendy to spot the themes

GLOBALLY invested themed funds have become something of a flavour of the month in the UK recently. They follow a model that has been successful in the US for more than a quarter of a century.

Fund managers such as Sarasin, American Phoenix and GT Global led the way in launching such funds in the UK, and have been followed by Perpetual and Guinness Flight.

These fund managers try to track trends that have worldwide implications, rather than just local. Such trends include ageing populations, rapid growth of new technology, restrictions in the welfare state and the breakdown of world trade barriers.

"A theme is something that transcends countries, borders, industries and sectors," says Peter Winders of American Phoenix. According to GT Global, the trends combine to offer investment themes that affect each other. So investment opportunities created by new technology will not necessarily be limited to technology stocks, but could be in financial services or healthcare, for instance. By the same token, investment opportunities for health companies are likely also to be beneficial for new technology.

If it all sounds complicated, then these managers have statistics to support their cases. A study conducted by Ned Davis, a US research group, on share performance between 1980 and 1993 found that during that period the wrong share picked in the wrong sector would have grown by just 4.5 per cent a year. The right stock in the wrong sector would have grown 15 per cent, but the wrong stock in the right sector would have grown by 19.8 per cent.

What fund managers aim to do is pick the right sector by using complicated trend analysis data, and then pick the right stocks within that sector. "It's much more important to us to be in the right sectors than in the right stocks. It is themes that will get you in the right stocks," says Mr Winders. "Before we start thinking about a country, sector or industry, we look at what themes happen to be in play, such as the ageing population, or moves to outsourcing. The aim is to be in the sectors which are moving forward."

By their very nature such funds are for those who seek growth opportunities over the longer term. Themes identified by fund managers are likely to last for 10 to 20 years and consequently the aim is to get in on the ground floor before too many people cotton on and push up the share prices.

This is what has happened in the biotechnology field where investors hoping to make a killing have forced many stocks up in price long before companies actually have products to sell. Investors are buying into an expectation of future profits but with the high risk biotechnology arena, many are likely to be disappointed. Global theme funds aim to reduce the risks by buying stocks that will benefit from future events, rather than punting on companies that may or may not make it big.

Results from many of the funds have proved disappointing so far. But with many of the themes not expected to have major effects for many years, that is perhaps not surprising.

While backing such trends could prove to be lucrative, the funds are only suited to investors prepared to wait it out according to Graham Bates, an independent financial adviser. "Specialist sectors such as technology and healthcare are best suited to someone who is prepared to take a long term view," he says. "Although there is greater volatility with investment in smaller and specialised companies, the growth potential is high. This type of investment would suit younger people who want to invest a small to medium-sized lump sum and who have plenty of time to watch the investment grow."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk