Partner insight: How to get the best from thematic ETFs

Thematic ETFs aim to give investors exposure to growth areas and companies that are innovating new solutions

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Aanand Venkatramanan, Head of ETFs, EMEA, LGIM

Aanand Venkatramanan, Head of ETFs, EMEA, LGIM

Thematic ETFs aim to give investors the opportunity to access high-growth areas and companies that are innovative and disruptive, and which have the potential to change the way we live.

As pioneers of thematic ETFs, LGIM defines themes as areas that bring about foundational change in the ways we operate in society. Characterised by bringing about efficiency gains and higher growth rates, thematic ETFs aim to offer investors exposure to high-growth, innovative areas that may not be captured by traditional benchmarks.

What themes are not is areas that don't fit into existing sectors or regions, so end up being called a ‘theme'. From an investor's standpoint, one needs to be careful when it comes to defining or identifying themes, and not fall into the trap of going into areas that are called themes simply because they don't fit existing categories.

To get the best from thematic ETFs, purity and diversification are key, and this is where the investment approach becomes especially important. Given that themes are in the early stages of evolution, we believe an active, bottom-up research approach with actively designed investment strategies is key to identifying companies that are engaged in those themes.

For more on investing with thematic ETFs, watch our exclusive Three Minutes With interview with Aanand Venkatramanan

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