Moneyfarm, the European digital wealth manager, today announced the launch of its thematic investing portfolios.
The portfolios allow clients to invest in companies with revenues that are tied to social-economic megatrends that are shaping our economy and the future of our world.
Investors will have the opportunity to choose between three distinct investment solutions covering three crucial megatrends - Technology and Innovation, Demographic and Social Shifts, and Sustainability. A fourth portfolio will also be available which is "multi-trend", i.e., a mix of the three identified macro-trends.
Using a mid to long-term strategy, Moneyfarm has adopted a ‘core-satellite’ investment approach, with portfolios designed to give investors with a medium to high-risk appetite more alpha (excess return) and the ability to align the investments with their own values and interests.
Investors with a minimum of £10,000 invested (“core”) with Moneyfarm will have the option to allocate a small proportion of their investments in these (“satellite”) portfolios. They in turn are 100% invested in equities with underlying ETFs dedicated to the main macro themes that have the potential for improved growth in the future, such as Clean Energy, Smart Cities, and the Blue Economy.
To ensure a balanced level of risk, each investor will be assigned a total quota by Moneyfarm, from 5% to 20% of their portfolio, that they will be able to invest in one or more megatrends. This cap by Moneyfarm is designed to safeguard investors from taking any undue risks with their “core” investments and instead have a measured exposure to high yielding “satellite” portfolios. Moneyfarm has therefore ensured that the thematic investments are not provided as standalone products, but are part of the client’s portfolio, providing exposure to high growth investment opportunities through careful risk management. By correctly inserting them into the clients' portfolio, Moneyfarm carefully evaluates the idiosyncratic risk (i.e., the risk linked to the single asset class, unrelated to the general trend of the market) in this solution which is higher than in traditional investments. The core and satellite portfolios will be managed and displayed separately, so clients can view and assess their respective performance figures without any ambiguity.
Investors will also be supported by a dedicated Moneyfarm investment consultant who will assist them in choosing the right themes that match their values as well as their risk appetite, return objectives, and that offer the best value over time.
Moneyfarm would routinely screen the markets, and with the aid of machine learning, seek to identify suitable ETFs for each theme in order to compose unique allocations tailored to each client. These include:
● Technology and innovation: This exposes investors’ portfolio to 10 ETF (exchange traded funds) that invest in companies with an exposure to breakthrough technology. These technologies have caught the attention of our asset allocation team and, while some are still in their infancy, they believe these trends will become more relevant in the future.
● Demographic and social shifts: This involves themes that consider that most countries in the world have an ageing population, are moving toward the creation of smart cities, and that e-sport and e-learning are gaining in popularity. Other social and demographic shifts include the move towards better gender equality, electric cars and the expansion of luxury goods and services for pets.
● Sustainability: Here Moneyfarm exposes investors’ portfolio to companies and funds that are aligned with the United Nations' 17 Sustainable Development Goals (SDGs). The UN’s 17 SDGs are important because they are designed to help end poverty, hunger, sickness, discrimination against women and girls and bring peace and prosperity globally.
● Multi-trend: The multi-trend portfolio is aimed at undecided investors who want to take advantage of a selection of the megatrends we’re focusing on. For them, Moneyfarm creates a portfolio based on the risk and returns profile of the ETFs in each of the main megatrends: technology innovation, demographic and social shifts and sustainability.
Moneyfarm will initiate a review of the thematic compositions annually, with the aim of identifying any new megatrends that could be implemented in thematic investment strategies with the potential for higher future returns. This could include areas such as medical and pharmaceutical innovation, clean energy and electric vehicles, Artificial Intelligence (AI), robotics, blockchain, metaverse, digital economy, logistics, smart cities, digital payments, cybersecurity, circular economy, Internet of Things (IoT), and infrastructure development.
Richard Flax, Chief Investment Officer of Moneyfarm, commented: "Our rigorous approach, supported by Machine Learning technologies, guides and supports the investor through the world of thematic investing, explaining strategies and helping the investor to make informed and appropriate decisions. As an Asset Allocation team, we constantly track emerging megatrends that we may wish to consider, and respond to the ever-changing needs of our clients. Our objective is to always provide investors with cutting-edge tools to improve and personalise their portfolios.”
To further understand awareness and appetite for thematic investing, Moneyfarm conducted a customer survey which found that 68% of respondents expressed interest in allocating at least 5% of their existing portfolio to thematic investments, although 27% were unsure how much overall they would allocate. Therefore, Moneyfarm’s dedicated investment consultants will be available to offer expert guidance and assist investors in choosing the right themes that match their values as well as return objectives. Among the clients surveyed, clean energy emerged as the most attractive theme for Moneyfarm’s investors, followed by Battery-Value chain, Sustainable Food and AI.
Giovanni Daprà, Co-Founder and Chief Executive Officer said: “At Moneyfarm, we believe that how people invest, and how they control their investments, play an important role in making the world better. During our conversations with clients, we hear time and again requests for Moneyfarm to offer solutions that allow them more say in what industries they support.
“With the core-satellite approach to thematic investing strategies, Moneyfarm will empower clients to actively allocate part of their portfolio to select themes and stories that resonate with their worldview. Our priority, of course, is risk management - to ensure clients can aim at high yield returns over the long-term, while at the same time avoiding undue risk and volatility. We are doing this by offering only a capped proportion of their investments to be exposed to thematic investing.”