Sluggish global growth and low interest rates mean investors should look to macro-economic themes to find more strategic investment opportunities, says Principal Global Investors.
Speaking to InvestorDaily following the launch of two new ETF strategies in the US, Principal Global Investors chief executive Grant Forster said thematic investing offered a “more considered approach” to passive investing.
“Where we see thematic investing going is giving investors the ability to make decisions more around investment themes as opposed to either more individual company performance as a driving part of the return, and to give an alternative to pure market cap weight in a portfolio,” he said.
Mr Forster said investors should look beyond market caps to determine where the best opportunity for returns lay, based on broader trends in consumption.
An example of this is the healthcare industry, Mr Forster explained, whereby research and development projects into new medications was increasingly conducted by smaller companies not found in usual indices.
Likewise, the increasing number of millennials becoming major consumers will likely have repercussions for company performance, as younger consumers preference different brands, Mr Forster said.
Investors looking for better yield should look to identify these themes and invest in companies likely to benefit from them, Mr Forster said.
“For example, you could take a view ‘I’m not going to buy the US index anymore, or I’m not going to buy a global index, instead I think the world is going to be dictated in this way’,” he added.