Deep Dive: Thematics offer diversification but investors must consider bond sensitivity

‘Dedicated specialists’

Thematic funds offer an effective toolkit to diversify portfolios and gain access to “dedicated specialists” in a variety of intricate themes, but investors must be cognisant of the risks that come with the higher-duration equity funds’ sensitivity to real bond yields.

Speaking to Investment Week, Quilter WealthSelect manager Stuart Clark explained that thematic holdings act as diversifiers to traditional exposures, and their team utilises the funds to gain exposure to areas in which the "additional layer of specialist knowledge" is supportive of both stock selection and risk management. Clark cited natural resources as one example in which this specialist knowledge is beneficial: "Natural resource equities can be an area where generalist managers can struggle with assessing the quality of resources or the conflicting factors that can drive the underly...