THEMATIC INVESTING WITH BLACKROCK AND ISHARES
Invest in the long-term trends transforming the way we live and work by investing thematically
Capital at Risk: The value of investments and the income from them can fall as well as rise and are not guaranteed. You may not get back the amount originally invested.
What is thematic investing?
Thematic investing is an approach which focuses on predicted long-term trends rather than specific companies or sectors, enabling investors to access structural, one-off shifts that can change an entire industry. At the centre of BlackRock’s Thematic investing philosophy lies our 5 megatrends: rapid urbanisation, climate change and resource scarcity, shifting economic power and demographic and social change – all driven by technological breakthrough.
A confluence of these global megatrends is prompting structural shifts in many
industries and changing the drivers of company’s earnings.
Investing for your future by investing in the future
Growing appetite for thematic investing comes from the need to identify future drivers of return (such as technological breakthroughs) from equity investments, which gives them the potential to outperform traditional broad indexes reflecting the movement of the entire market.
Identifying the potential for structural change and investing in expected transformations early (such as the rise of the internet in the 90s) is a key driver of successful investing. This is particularly important for long-term investors to ensure that their portfolios are positioned for growth opportunities.
Thematic investing at BlackRock
BlackRock & iShares Thematic suite is positioned to access the long-term effects of these megatrends, offering both index and actively managed funds. Our Thematic Research and Investment Group (TRIG) identifies long-term themes driven by one or more of the 5 global megatrends, as well as working with outside resources to look for trends.
They then apply a repeatable process to decide if the theme is better suited to an index approach, or an active approach.
EXPLAINER: An index approach is a passive management style of investing - where a Fund will typically buy all the stock in, for example, the FTSE 100 in the same proportion they represent in the index.
An active approach is when a Fund manager will try to beat the returns of the index to which it relates (its benchmark). The manager will pick stocks to buy and then compare the returns that they make against the benchmark, he/she does not have to buy all the index stocks.
Index
Narrow investment universe
Low divergence between companies
Few Initial Public Offerings (IPO)
Active
Broad investment universe
High divergence between companies
Many IPOs
RISK: There is no guarantee that research capabilities will contribute to a positive investment outcome.
Connect megatrends to investment themes
breakthrough ?
& social change ?
urbanisation ?
resource scarcity ?
global wealth ?
iShares funds (index)
Click the view fund for more information
Ageing
Population
View fund
Agribusiness View fund
Automation
& Robotics
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Digitalisation View fund
Digital
Security
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Electric Vehicles & Driving Technology View fund
EM Consumer
Growth
View fund
Global Clean
Energy
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Global Timber & Forestry View fund
Global Water View fund
Healthcare
Innovation
View fund
Inclusion &
Diversity
View fund
BlackRock funds (active)
Technological breakthrough
New technologies lie at the heart of resolving or accelerating the five megatrends. Breakthrough innovation is necessary to address large-scale challenges (e.g. ageing economies, climate change), while new solutions are also targeting relatively minor problems (e.g. payments, streaming). This backdrop has created a fertile ground for disruptive innovation and Thematic investing.
Demographics and social change
Changes in global demographics will bring significant challenges and opportunities for societies and businesses. The forces that underpin this megatrend include ageing populations in advanced economies and China, the outlook for future jobs, immigration pressure, skills imbalance and the radically different priorities of younger generations.
Rapid urbanisation
Cities have always been hubs for talent, capital and innovation. In the last decade, hundreds of large cities have been built in emerging economies, attracting significant infrastructure investments. Large cities such as San Francisco, London, Paris and New York have also been the ideal launch pads for entrepreneurs given their large, dense populations. Understanding the advantages and challenges of future cities can help us identify the next sources of growth.
Climate change and resource scarcity
An expanding population and the rising demand for food, energy and materials continue to strain the finite resources of the planet. The need for solutions that improve energy efficiency, lower food waste and provide alternatives to scarce resources has never been greater. Underlying these trends is the persistent increase in global emissions which has led to intensifying debates around climate change and how we can resolve it.
Emerging global wealth
In the last twenty years, developing economies have been lifted by the rising tide of globalisation and manufacturing shifting to Asia. The emergence of a sizeable, aspirational middle class, particularly in China, has made it an important destination for global companies. We continue to expect emerging markets to offer significant growth potential for domestic and multinational firms.
Ways to invest in megatrends with BlackRock and iShares
Use our simple tool to see how our five megatrends
connect to investment themes and funds.
BLACKROCK'S MEGATRENDS
Learn more about these powerful, transformative forces that could change the global economy, business and society.
