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What is thematic investing?

Thematic investing looks first at big-picture factors—demographic, technological, legislative or cultural—that have the potential to affect the economy in dramatic and profound ways. Once big-picture themes have been identified, industry groups and specific companies that are seizing the opportunity of each theme are researched. We believe these companies offer the potential for long-term success.

Thematic investing offers the potential opportunity to capitalize on economic and technological changes. Disruptive ideas, innovations and economic forces can arise and sometimes transform the world we live in. Positioning portfolios to benefit from these themes can help provide investors the ability to identify beneficiaries and reap the rewards. Alternatively, thematic investing can also uncover areas of the financial markets to avoid or underweight. There are many exciting examples of thematic changes that are at work today and may offer exciting investment opportunities.

Today, the Baby Boomers are beginning their retirement. They constitute a population bulge, with 10,000 people turning 65 each day for the next 19 years.1 This aging of America will likely have dramatic effects on spending patterns, healthcare trends, financial services and the leisure business, to name just a few.

Millennials, the demographic cohort of individuals born between 1980 and 19992, will likely have just as significant an impact on the economy in the years ahead. This group has grown up incorporating technology into nearly every aspect of their lives and is driving the demand for social media platforms and on-demand services from Uber cars to vacation homes to Internet streaming media.3

Many exciting examples of thematic changes are at work today.

Technological change has an increasing velocity, with profound implications for individuals and businesses. We have all witnessed how things evolve and how change can create new markets and opportunities. Apple introduced the iPad tablet just six years ago, but an estimated 1 billion people worldwide used a tablet in 2015.4

Furthermore, advances in healthcare research from genomics to biotechnology are on the verge of major breakthroughs in the next decade. Specifically, new cancer therapies in clinical development or recently launched have the potential to improve safety, quality of life and most importantly, survival rates for patients in treatment.5

Companies positioned to reduce healthcare outcomes, reduce healthcare costs and help create market efficiencies through innovation should thrive in our view.

Public policies affecting taxes, public infrastructure spending or regulatory legislation can have a dramatic affect on business success and opportunity both at home and abroad. Analyzing and understanding how these actionsand relationships can affect financial markets, businesses and individuals is vital for investment success and should be taken into account in portfolio construction.

Investment advisors should fully articulate their investment philosophy and the process by which they help clients construct and manage portfolios. Uncovering attractive investment themes is a very important aspect of our wealth management process. We think it is not enough, however, to identify an attractive trend or disruptive change. There are other equally important elements to portfolio construction: experience, access to intellectual capital, fundamental research and analysis, as well as an understanding of the role of supply and demand in the timing of investment decisions.

2 Dessloch, S. “The rising Millennials-an update,” CIO WM Research, UBS Financial Services Inc. Oct. 20, 2015.
4, January 8, 2015
5 Brinmeyer, J. “Major advances in cancer therapies – update 5,” CIO WM Research, UBS Financial Services Inc., Dec. 18, 2015. Stuart C. McLeod and Camille Valentine are Financial Advisors with UBS Financial Services Inc. a subsidiary of UBS AG. Member FINRA/SIPC. in One Post Office Square, Boston, Mass. UBS Financial Services Inc. Financial Advisor(s) engage Worth to feature this article. As a firm providing wealth management services to clients, we offer both investment advisory and brokerage services. These services are separate and distinct, differ in material ways and are governed by different laws and separate contracts. For more information on the distinctions between our brokerage and investment advisory services, please speak with your Financial Advisor or visit our website at The strategies and/or investments referenced may not be suitable for all investors. UBS Financial Services Inc., its affiliates and its employees are not in the business of providing tax or legal advice. Clients should seek advice based on their particular circumstances from an independent tax advisor. The views expressed herein are those of the author and may not necessarily reflect the views of UBS Financial Services Inc. Member FINRA/SIPC. This article was originally published in the April/May 2016 issue of Worth.


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