The latest investment theme

Kiwi Invest is more interested in investment themes than bottom up company research.

Sunday, July 12th 2020, 7:22PM

investors facing volatile global markets are responding positively to the strong track record and diverse equity holdings of the $1.6 billion Kiwi Invest Global Thematic Fund, which has returned about 22% in the last year, almost double the ACWI benchmark, since launching as a standalone wholesale fund in 2018.

The fund is part of Kiwi Invest’s suite of wholesale portfolio investment entities.

Now the team behind the Global Thematic Fund - Nathan Field, portfolio manager and head of Global Thematic, senior equity analyst Frank Braden and equity analyst Johnson Weng has published a paper (request a copy here) explaining Kiwi Invest’s unique approach to thematic investing and its advantages over more traditional investment styles.

The Global Thematic Fund gives investors access to an actively managed portfolio of global shares that aims to achieve returns in excess of the MSCI ACWI over the medium to longer term.

Field says the paper, titled ‘Global Thematic Investing: Beating the market with ‘winning themes’’ is designed to inform investors who may be less familiar with the thematic model.

The Global Thematic Fund’s point of difference is its deep analysis of consumer trends and the dynamics between industry competitors, as well as the emerging pressures and opportunities facing various sectors.

Field says, “What we do is subjective and based on our skill in identifying the trends and patterns we think the market is overlooking, so we can predict the upticks in those trends in the short- to medium-term before anyone else. We spot the themes first and then do the quantitative analysis. At the moment we are following about 25 themes expressed through 100-plus large cap global stocks.”

In examples provided in the paper, instead of a general theme like ‘aging demographics’, the Fund might focus on specific areas of health care that are seeing the strongest demand trends: oncology, cardiovascular devices, diabetes management. Instead of ‘cloud computing’, the Fund narrows the field to enterprise software companies with subscription-based revenue models, and companies leveraging the growth in cloud infrastructure services.

The fund deals only in large, liquid global stocks (with an average market cap of about $80 billion) and is consistently active, with 100% investment - meaning broker commissions and therefore the cost of trading are low.

Themes can come from anywhere, provided that a clear path to monetisation is indicated and the company’s ESG criteria are met; the team will analyse everything from the results of a reporting season to reviews of technology products or consumer behaviour in a shopping mall.

Kiwi Invest’s May 2020 market update indicates that Global Thematic returns were broadly in line with the benchmark for the month, returning 4.07%, 0.05% ahead of the benchmark. It was a good month for high growth companies, and some of the best performers were digital industry disruptors like online security company Crowdstrike and electronic trading platform Tradeweb. Strong gains were also seen in stocks exposed to the US housing sector such as Home Depot, Techtronic and DR Horton. Defensive themes continued to give back a little ground after their resilience during the sell-off, with stocks like Pepsi and Thomson Reuters weighing on relative performance.

Much of the world and especially the US markets remain susceptible to COVID-19-related volatility, leading the Global Thematic Fund to further broaden its theme exposures to account for the possibility of a robust recovery in business and consumer spending if the pandemic is effectively controlled.

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