Why aren’t we investing in XYZ innovation fund?

December 3, 2021

Some Thematic funds may seek to profit from technological and economic trends such as artificial intelligence and disruptive technology.
The names have changed, but the strategy is not new. Many thematic funds have a history of popping up in sectors following strong performance.
Unfortunately, these solutions often have undesirable characteristics:
– High concentration: on average, 50% of assets are invested in the top 10 holdings.
– Expensive: the average thematic fund costs more than 60 bps.
– Poor performance: from January 1996 – July 2018, new thematic funds underperformed the MSCI ACWI IMI by 3.3% annually in their first two years after launch. In addition, less than 15% of thematic funds remain open for 15 years or longer.

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