Investors should pay attention to three key things before considering any investment: its credibility, transparency and diversification, a senior investment specialist has stated.
Speaking to FTAdviser In Focus, Mobeen Tahir, associate director, research, for WisdomTree, said: "Investors should be able to understand what they are investing in.
"Certainly the exchange-traded funds industry is enabling that change and offering that transparency that might not have been available through certain investment vehicles in the past."
Talking to senior editor Simoney Kyriakou on the latest In Focus Fireside Chat, Tahir also explained the way in which fund managers can structure funds to take into consideration transparency, diversification and cost-efficiency while also benefiting from key long-term thematic trends.
This is becoming more important as passive fund manufacturers are attempting to create funds that will start from 'first principles', for example with an environmental, social and governance ethos, and build a strategy that aligns to global transitions such as green energy, all the while keeping the simplicity and cost-efficiency associated with passive investments.
He said: "Certain shifts in the world are quite structural in nature.
"The change that unfolds is something that is more permanent and profound. The internet is a perfect example... but to go from a novel technology to having an impact on the world, you need capital, and that is where thematic investing comes in."
This is where investors can benefit, Tahir explained, as they are putting money into funds that are structured along those themes. This not only helps to provide that much-needed capital injection into innovative technologies, but also helps investors make money in the process.
He said WisdomTree had identified four key megatrends, which are:
- Social and demographic shifts
- Technological shifts
- Geopolitical shifts
- Climate and environmental pressures.
"The exciting thing for investors now is the opportunity to access this space is increasing, because the [financial] industry itself is innovating.
"What investors can look for today are different shaded exposures, not just your traditional market-cap tech stocks, but exposures to specific themes, whether that is clean energy or cyber-security," he explained.
And when it comes to recognising themes, he said it was important to make sure investors did not just have exposure to any one country or theme but to find areas where there is crossover, such as technologies that are interconnected within other themes – such as social or climate shifts.
To watch the full interview and to hear about how advisers can structure these conversations with clients, click on the image above.
simoney.kyriakou@ft.com
