Does thematic investing create value for investors?
Does thematic investing create value for investors?
Not quite, according to this NBER paper which shows that at least in the ETF space, thematic investments underperform broader funds by about a third over the five years after launch, delivering negative alpha of about -4% a year.
The argument is not new: thematic ETFs are generally launched just after the very peak of excitement around an investment theme, holding portfolios of “hot” assets already overvalued at
launch and with über-high expectations. As industry and media hype vanish or financials disappoint, thematic investment underperforms or delivers negative risk-adjusted returns.
We couldn’t agree more.
That’s why at Niche AM we don’t really invest in themes but rather in niches, i.e. assets or themes which are all but neglected by the market and are thus deeply undervalued and entirely off-radar for investors and media.
Niche AM’s mission is somehow to find a theme before it becomes so. The niche may take time to attract investors and deliver potentially strong returns, but the enormous valuation opportunity makes it worth the wait.
This is a marketing communication for institutional investors. Please refer to Fund Prospectuses & KIDs before making any investment decision.
For any questions email us on: info@nicheam.com
Follow us on LinkedIn: www.linkedin.com/company/niche-am
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