A Thematic Approach to Investing
Stein International investment Management
Investing through the lens of global Sustainable themes...
A THEMATIC APPROACH
What is a thematic approach to investing?
Taking a helicopter or birds eye view of the world helps us identify future long-global term trends. We call these trends themes.
We have five themes altogether, each one of these themes is included in the Stein, “Global Themed – Green Planet Portfolios. It is into these portfolios that the majority of our clients’ capital is deployed. So, what do we do? We see ourselves as the team manager. To use a sporting analogy, our role is to devise the strategies to win games, pick the right athletes to represent our club and decide which players play, and which stay on the bench. In the investment world, this means creating the themes, selecting fund managers to be part of each theme using strict selection criteria, then manage and monitor the “team”.
An example of a theme: Let’s take emerging middle class consumers: In 2009, the number one middle-class consumer spender was the USA, with total spend at $4.4T. In 2020 it was China’s middle class at $4.5T and by 2030 it is forecast to be India at $12.8T as the world’s largest spending group*. Understanding what these emerging consumers will want to purchase (aspirational designer good, UK & USA University places, exotic travel) means we can identify fund managers that focus on buying companies that will make profits from these trends.
Based on 2005 PPP US Dollar. * Source Kharas, Homi and Geoffrey Gertz, ‘The New Global Middle Class from West to East.
We empower four of the world’s top Investment houses to manage a major element of our “Global Themed – Green Planet Portfolios called Global Cornerstone. As the name reflects, this theme is the bedrock to the portfolio and is the largest theme of five.
Each provider has a global mandate, we do not tell them how, when, or where to invest, rather they are free to run their funds, Model Portfolios or Discretionary accounts according to their own inhouse styles.
They have been chosen because they have differing styles or approaches from each other. This contrast reduces your risk, after all, no one is right all the time. They are our ‘Strategic Partners’.
Value & Undervalued investing?
Undervalued: A handful of funds invested in regions or sectors that are “unfashionable”, out of favour, or simply undervalued compared to their counterparts in other geographical locations or markets. An indicator might be a low-Price Earnings (PE) ratio, for example on a UK FTSE 100 fund as compared to a similar fund on a US exchange.
Value: Growth investing is the fast and furious approach and Value investing is the slow and steady philosophy, usually comprising of the more traditional and mature companies. Our stable of the very best Value (income) funds is designed to be a hedge against inflation and volatility. The main pro of Value investing is that the companies usually give their shareholders a share of their profits called a dividend. This cash reward usually rises each year and helps to give a return even in a flat market.
What could be more important than protecting our planet and reversing climate change? A greener planet with broad biodiversity, focusing on Net Zero is in our interest. The focus is on sustainability, clean energy, water, and renewability as well as a circular economy. Approximately eight funds make up this theme.
The transition to a low carbon economy comes with costs, both associated with action and inaction. However, once renewable energy capacity, such as wind or solar, has been developed, the cost of generating electricity exponentially drops and ongoing maintenance falls. This means the payback period becomes significantly more attractive than the extraction, processing and distribution of fossil fuels. Whilst the incur of costs in the transition to a low carbon economy is unavoidable, we are strong believers that both financially and environmentally, the long-term costs of the status quo significantly outweigh the short-term costs.
Stein International Investment Management
Your investment choices
Your three choices: 1) Global Themed – Green Planet Portfolios. Using all five Investment Themes from above and below, across three risk profiles. 2) Inflation Hedge – Value Portfolio, one of the first portfolios containing over half a dozen AAA rated ESG Income funds. 3) Bespoke, a portfolio, or Discretionary account, tailored to your specific needs. All above in all major currencies. Direct shares can be included
We have no financial ties to any institution; our independence enables us to choose the fund managers we think will best benefit our clients. Our rare approach of not accepting commissions also eliminates investment bias – where a fund is often chosen for the wrong reasons
Being independent, our clients have untethered access to over 14,000 funds from investment houses, Model Portfolios (MPS) or Discretionary Fund Managers (DFM) from around the world. We use strict criteria to filter these down into our five Best of Breed Themes
Your portfolio's ESG grade
Every fund, Model Portfolio (MPS) or Discretionary Manager (DFM) we select is referenced to its Green Ecological, Social, and Governance credentials (ESG), using the MSCI Morgan Stanley grading system, highest being AAA
This is a fundamental part of our decision-making process which enables us to provide one of the first AAA-rated ESG Portfolios. Over 85% of all our selected investment universe, covering over 110 funds are rated AAA or AA. There are also 100% AAA portfolios
Fourth industrial revolution
The 4th Industrial Revolution (4IR) is radically changing the world around us. Brought about by advances in Growth and Disruptive industries such as New Green Energy, Biochemistry and the Metaverse to name but a few. Approximately six funds make up this theme.
COVID-19 was a catalyst for tech adoption in homes and companies alike. Microsoft CEO, Satya Nadella, said that two years’ worth of tech transformation was adopted in two months. However, the trend has continued, and we are on the cusp of a data and digitisation revolution amongst many other new technologies that will power the next transformation.
New powerhouse – emerging world
China is forecast to be the world’s largest economy by 2028 and India the 3rd largest by 2030/31. These ’Emerging Markets’ account for circa 70% of the world’s population but only 30 percent of Global Gross Domestic Product (GDP). As the rate of GDP per capita rises in these parts of the world, consumers’ disposable income will rise, benefiting companies that we can own in our funds.
A future economic superpower: We are all very aware China will eventually displace the US as a major economic superpower, but how this will impact global economics and markets is intriguing. As a result, peripheral but emerging Asian economies such as Vietnam, Singapore, South Korea and Indonesia also offer exciting opportunities.