Pictet’s thematic team is still on course to launch a consumer-focused fund despite the significant hit consumer confidence has taken during the Covid-19 pandemic.
Speaking to Citywire Selector, Hans Peter Portner, who is head of thematic equities at the Swiss group, confirmed his team’s commitment for a launch in October. This is having launched a strategy focused on family-owned stocks earlier this year.
Portner said the new fund would not be drawn into areas such as cruise ships, travel or luxury goods – all sectors that have suffered in recent months. He said it would operate with a more defensive focus.
‘The new theme is an antithesis of our Robotics fund. Robotics makes some of our skills redundant, while the consumer theme takes care of us again, which includes such segments like consumer services and education for example.’
The decision to go ahead with a consumer-focused product at a time when consumer confidence is flagging might raise some eyebrows, but Portner said it is important to steer clear of short-term thinking.
‘Our consumer theme is a truly secular trend. We increasingly see more private participation in education, more demand for consumer services, and people willing to spend their spare time on intellectual activities. Whether it is Covid or not, this doesn’t impact our decision-making process.’
Another sub-segment of the fund will be pet care, which Portner said is not quite big enough for a separate product but nonetheless sits nicely within a wider consumer strategy.
‘Pets is quite an irrational market that caters to consumers that are ready to pay exorbitant amounts of money, which means your margins are quite healthy. But I would consider it as a subtheme and won’t run a single strategy there,’ he noted.
Part of the reason why Portner is not hesitating to launch a new product in the eye of the storm is because he has done this before. ‘An example I always mention our Timber fund. When the Lehman crises materialised, we still went for the launch as we maintained our long-term horizon.’
Portner said he is generally happy with how the thematic funds in his range fared during the crisis. ‘Covid is not a pleasant event, per se, but it benefited thematic investing and accelerated some secular themes such as disease prevention, home office or security for example.’
Funds such as Pictet Biotech and Pictet Robotics were unsurprisingly the biggest beneficiaries from the recent market developments, with the latter winning back 22% of the lost assets in the course of several months.
The only thematic fund which struggled during the downturn was the Pictet-Premium Brands strategy, which underperformed global indices. The fund lost 1.4% over the 12 months to June 2020 in US dollar terms and saw 22% dip in the first quarter of the year.
‘This fund is tapping the area that was much more hit by Covid that other themes, but even there we don’t have any plans to change the strategy. Secular themes are not immune to cyclical hits but once it is all over – we will go back to normal. This is one of the essences of thematic investing – you not only can but should buy the dip.’
Despite certain setbacks and uncertain economic backdrop, Portner said there are plenty of silver linings when it comes to themes, even though that means more asset managers could explore these investment avenues.
‘Interest rates will remain extremely low and many equity investments have extremely predictable margins, behaving like long-term bonds. There is an ongoing re-evaluation of the equity space as a result, and thematic investing is incarnation of this, that’s why our team has more competition nowadays.’
Stay tuned for the second article where Portner will talk about staying fit amid intensifying competition and quantamental future of the team’s processes.