As of yesterday, retail investors are now able to invest in a portfolio of stocks optimised for investment in winter. Which the provider (online stock broker Interactive Investors) explains is aims to help investors take advantage of a market anomaly “which suggests that investors would be significantly better off by just investing across the winter months rather than all year round”. They are also, now able to invest in an ETF that tracks an index that tracks the rise of the robotics and automation sector.
These are just two options out of literally thousands from which investors can choose and more join the fray everyday. The question is how does one find the signal in the noise, especially when it seems no longer certain that that the old signals are quite as strong as they once were?
Brown Shipley CIO, Kevin Doran believes that the trend toward thematic investing, like that evidenced by the Robotics ETF is likely to continue to grow: “People are looking for longer-term reasons to invest in equities. Just because that is how it has been done in the past, is no longer a good enough reason. People are looking for a much stronger narrative for why they should invest”
But, he adds, it is important to be able to differentiate between what the longer term secular trends are and what are short term fads. “It could well be that that fad is part of a larger secular theme, but that is by no means certain,” he said.
Gary Potter, co-head of multi-manager at F&C Investments, however, takes a more cynical view.
“Most new ideas are transient at best,” he said, adding: “The asset management industry, in the main, is motivated to grow assets under management and generally speaking one firm’s gain is another’s loss.
There is no doubt that money is being allocated away from more traditional approaches to new ways of doing things, but what firms should be focusing on is getting their core capabilities right.
“Sure you can have satellite funds, but make sure your core products are performing well,” he said.
He is also of the view that there are fundamentally too many funds. “That there are more funds than stocks is just ridiculous,” he said, adding, fund groups are reluctant to close funds because it could mean that they will lose the assets that those funds currently contain.
Doran, agrees that the universe of open ended funds is large and that size has its drawbacks, pointing out that such a large universe comes with high search costs. “But, that is where a firm like Brown Shipley comes in because we have the dedicated fund analysts to find the right funds,” he added.
Quite what the next successful investment trend is going to be remains to be seen. There is little doubt that thematic investing strategies are growing in popularity, but the same could have been said about the grographic trends toward BRIC investments just a few years ago. Ultimately, whether one decides to invest thematically, geographically or stick in cash, will boil down to one's conviction in a particular investment thesis. The only certainty is that the options facing investors have never been larger in number, the possibilities are very nearly endless, which just makes the current market that little bit harder.
