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Global Perspectives: Thematic investing

Richard Clode, Portfolio Manager, joins Matthew Bullock, EMEA Head of Portfolio Construction and Strategy, to discuss thematic investing. They cover the importance of thematics, their take on the do’s and don’ts for investors, key technology themes, and portfolio construction considerations.

Matthew Bullock

Matthew Bullock

EMEA Head of Portfolio Construction and Strategy

Richard Clode, CFA

Richard Clode, CFA

Portfolio Manager

20 Sep 2023
14 minute listen

Key takeaways:

  • Unpredictable news flow and an acceleration in the pace of change risks whipsawing investors. Thematics provides a longer-term framework with which to assess the changes in which you have genuine conviction.
  • From an investment perspective, it is not enough to identify themes. Marrying top-down and bottom-up views is critical in identifying the winners of tomorrow.
  • Successful thematic investing requires decades of expertise and means repositioning portfolios at inflection points. We are currently at pivotal points across a number of industries with exciting opportunities from a changing of the guard.

Alternatively, watch a video recording of the podcast:

Matthew Bullock: Hello, and welcome to the latest recording of the Global Perspectives Podcast, where we’ll be talking about thematic investing. And today, we are fortunate to be joined by Portfolio Manager, Richard Clode. Richard is Portfolio Manager in the Janus Henderson Global Technology team, and very importantly, our lead on thematic investing. So welcome, Richard.

Richard Clode: Thank you.

Bullock: Before we begin, a quick introduction of myself. My name is Matthew Bullock. I’m the EMEA Head of Portfolio Construction and Strategy. So my team’s role is to help investors try to make sense of what’s happening in markets, what that means for their portfolios and, importantly, what to do about it.

And that is where, in the most recent challenging environment, thematic investing becomes a really hot topic. So to get us started, Richard, thematic investing is a super broad term which means so many different things to different people. So how do you define thematic investing?

Clode: Yes, interesting question. I think from the high level, looking at themes can be a great way of identifying long-term growth opportunities. But that’s really only half the story. And you asked me what did thematic investing mean to me, and I think that’s the other half of it that’s perhaps been a little bit neglected in recent years and has led to some of those challenges in the thematic investing space.

So I think you’ve got to marry that high-level, top-down thematic thinking with bottom-up fundamental investing. It’s not just enough to identify themes, but then within those themes, identify great companies, to identify the true winners in industries, that’s what’s ultimately going to deliver not just the long-term growth but the long-term stock returns that ultimately is what our clients are investing in themes for.

Bullock: So given the current market backdrop, why would you say that thematic investing is so important?

Clode: Boy, it’s noisy out there. There’s CPIs, PPIs, Russia-Ukraine, China-Taiwan, and that’s before we even head into next year, where we’ve got a bunch of major elections coming up as well. And I’ve done this for 20 years, and there have been very noisy periods in markets.

And I’ve always felt it’s been useful to take a step back and just think a little bit longer term, because otherwise, you can just be whipsawed by current news flow or whatever is on the agenda of the day, and just think about what do you genuinely have conviction in, longer term.

And I think that’s where thematic investing can be a very useful lens, as we were just talking about, that if you think about the global challenges that we face, a growing population, an ageing population that leads to resource constraints, that leads to climate change, that leads to more poverty, inequality, I think we can all agree on those megatrends, and I think we can all agree they’re not going to go away.

Now, actually, if you can agree on that, there’s not actually many things we probably can agree on in the world in the stock market today, so I think that’s actually quite an important starting point and foundation for thinking about investment opportunities, if you can agree on those megatrends and challenges that we face, and then think about solutions to those challenges. Then I think you’re going to be identifying some very long-term and very large growth opportunities.

And then you can also think about also potentially being on the right side of government regulation, government policy, government subsidies as well, which helps with the risk aspect of investing as well. So I think now is exactly the time, when it is so murky out there, to take that step back, to think a bit more longer term. That’s where themes can work.

But then you’ve got to marry that up with bottom-up fundamentals. Because the other thing that has returned is cost of capital. And again, that’s part of the reason of the challenges we’ve had in the last couple of years is, suddenly, money is no longer free, and business models that aren’t self-sustaining, that aren’t going to be profitable, that are going to be burning cash for years have been mercilessly exposed by the stock market, as they should be.

So again, that’s why it’s an important time to marry not just that top-down thematic thinking, but with that bottom-up fundamental investing, to marry the two to deliver those solutions to our clients.

Bullock: But there are, of course, many providers of thematic approaches in the world, so this is not something that is necessarily new. But then how are you, and then Janus Henderson as a whole, approaching thematic investing?

Clode: I think very much trying to marry that top-down and bottom-up. We have dedicated strategies here at Janus Henderson that have track records going back in some cases over 30 years, in the sustainable sphere, in technology, in life sciences, in property.

And you don’t build up 20- or 30-year track records by having one good year or having a lot of turnover in the investment team. We have investors that have been doing this, again, for 20 or 30 years, and they’ve just stood the test of time. So I think they’ve been good at not only being able to identify those themes… And those themes don’t stand still. Those themes are dynamic. So even when you identify a long-term theme, that theme will be dynamic.

And I’m a technology investor, and the internet has meant many different things over the last 20 years, and I’m sure AI now will mean many different things through the investment horizon that we’re looking through. Being able to do that over the long term, over multiple decades, you obviously can keep up with the dynamism of these themes but then also identify those winners, those great stocks that are going to be delivering those great returns over the long term, which is marrying both that top-down and the bottom-up.

And I think we’ve got enough investment acumen and the dedicated teams across a range of areas that very much overlap and map to those thematic areas, that puts Janus Henderson in a strong position to deliver the thematic solutions for our clients, as we have done for many years.

Bullock: So you mentioned being a technology portfolio manager. And I just want to see if you can bring it to life a little bit. So let’s go a little deeper into the technology side and how that’s solving for a number of the challenges and the broader themes that you spoke about earlier on.

Clode: Sure. And I actually studied history at university, so I always like looking back at history, even despite being a technology investor and I’m meant to be looking forward. And you go back to things like the Malthusian theory that there was a natural cap to the global population because there had just come a point where we just couldn’t support that population. And then we spent 300,000 years putting the first billion people on this planet, and then the last billion was added in only 11 years.

And generally, the reason why that theory was ultimately disproved is a lot of that was down to innovation, and a lot of that came from the technology sector. So we’ve always looked through that lens of technology being the science of solving problems, providing solutions to a lot of challenges, as it did through the agricultural revolution, as it did through the industrial revolution.

And now, through the internet age and moving into an AI era, we see technology as providing solutions to productivity boosts. After having a bit of a lull, we had a big boost of productivity through the internet era, through the early years of that Chinese economic miracle. And a lot of that has plateaued. And again, can AI deliver productivity boosts?

When we think about some of those resource restraints that we have, some of the climate change issues that we have, again, we need to make the world more efficient as the population is going to continue to grow.

And again, we think technology has a very important place to provide solutions there, whether that be the move to cloud computing, AI on the productivity side, or providing insights from data into making cities smarter or transportation networks more efficient, and then solutions to whether that be an ageing population, so again, being able to provide robotics or medtech support to an ageing population as well.

So we think that on the technology side, there are many areas that we can look to find those exciting long-term growth opportunities, because we’re providing solutions.

And having been an investor in a lot of big tech companies in the last ten to 20 years, again, for me, it’s exciting that a lot of those solutions would be on the right side of government policy, subsidies and regulation, which again changes the risk profile compared to some of the technology companies that we’ve been investing in, some of those mega caps that we’ve been investing in for the last 20 years.

Bullock: So going back to when I said about a lot of people are talking about thematics, is there a risk that lots of people are talking about thematics, lots of people are talking about technology? Does that crowd it out? Does that actually reduce the opportunity?

Clode: And I think we saw a little bit of that in recent years, where basically every portfolio had exactly the same five to ten stocks in there. And that’s where I was talking about marrying the top-down with that bottom-up fundamental thinking, that we went through this internet era, we had the launch of the iPhone in 2007, and then basically that led to the creation of the FAANG. We all downloaded all of those apps, we all used all those companies’ products and services more and more. And that led to outsized growth and outsized market caps for those companies.

But we’re coming to a bit of the end of that era in terms of saturation, and now we’re entering a new era, an AI-led era. And there will be… Some of those winners will be winners in that new era, but there will also be new winners. And we’ve seen companies like Nvidia obviously perform very strongly this year. And that gives the opportunity for a bit of a changing of the guard.

And again, I think that’s a great opportunity for specialists in particular areas, so whether that be technology, whether that be in life sciences, where we’re seeing a great period of innovation and acceleration of innovation. We’re seeing on the sustainable side obviously a huge amount of innovation to create those solutions to the challenges we were talking about.

Even on the property side, we saw a huge change from innovation coming from e-commerce and what that did to high streets, but then we had hybrid working, coming out of COVID. And now, I think in an era of AI, I think we’ll see a lot of industries disrupted, which will have a lot of impact as well, not just on the office space, but I think in a lot of the ways that we use property or how cities are constructed.

So this is a time of accelerated change. And again, that very much leads back to active management, to fundamental bottom-up understanding of these themes, but then the underlying trends and technologies and innovations that’s going to lead to very different winners in the future. And if we were in a world where it was just going to be the same stocks that performed every year, year in, year out, you probably wouldn’t need us.

But this is a very important time, where I think there is that inflection, there is that change. And so, hopefully, our clients can trust us that having done this for 20 or 30 years in some cases, we’re pretty good at being able to identify those inflection points and that changing of the guard and the new winners and the great investment opportunities that come out of these big, big changes. That’s a great opportunity set for us.

Bullock: So then finally, I just want to briefly address how thematics can be used in portfolios, because that’s a question that comes up a lot in the conversations that I go out and have with our clients. And this is a bit of a shameless plug here, because we’ve written a paper about this, talking about how to use thematics in the portfolio.

And there is, of course, the return potential, which you’ve briefly touched on so far in the podcast, but there is also significant risk and diversification benefits that come from including thematics. However, there’s also risks, and I want us to quickly touch on some of those risks and see what you think about those as well.

And one of the big risks or one of the big issues we saw when we looked at thematic strategies out there in the market was some can be so broad that it really diversifies away any of the benefit, and some are really narrow. And so you either had a really concentrated portfolio with lots of risk or the portfolio didn’t really reflect the theme.

The second issue that we found, talking to clients, is trying to time a lot of these themes. And the way we see it, it’s akin to trying to time the markets, which is it doesn’t work. So I just wanted to hear your opinion about how clients should be thinking about thematics and portfolios, and whether you agree with those conclusions that were found.

Clode: Yes. And those are very important points and risks to point out. And I think as a house, Janus Henderson hasn’t been one to launch 1,000 very niche, thematic strategies, very much to that point. Because you don’t want to just buy the only 30 stocks that have anything to do with this niche theme, because you’re not really stock picking. You’re just basically buying exposure to a theme, and you’re buying the tenth best company or the 12th best company in one industry.

That’s generally not been… History has proven that’s not a great way to invest for the long term. And then the counter side is if you go too broad, then you just end up with a fairly generic technology fund or a life sciences fund. So it’s just trying to find that happy medium in the middle.

And again, having done this for a long time, and many of my colleagues here at Janus Henderson, they’d have done it for a long time, just finding that happy place in the middle where you can get that good exposure to the right areas within themes, but then also picking winners, picking great companies and just having that big enough investment universe to be able to do that and to genuinely do bottom-up stock picking to marry with your top-down thinking, that’s what sustains strategies over the long term.

You can’t have a strategy that’s run for 20 or 30 years if you’re not doing that. And I think what we’ve seen in the market, and particularly in the last few years, is strategies getting too narrow in terms of thematics and really not doing that stock picking, not doing that fundamental analysis, which made them very susceptible to a change in rates or a change in market sentiment.

And I think what we try and do here in Janus Henderson is provide solutions to our clients that we feel very comfortable to provide both that long-term growth opportunity, but married up with a fundamental analysis that means that they’re not so sensitive to changing rate expectations or they’re not just full of unprofitable technology companies, like in my space. It’s trying to find that balance. And I think finding investment houses that have been able to find that balance over the long term is actually quite rare.

Bullock: Well, Richard, we’re unfortunately out of time. We’ve covered an awful lot, and there’s a lot more we could cover. But I wanted to thank you very much for joining the podcast and also to thank all our listeners for joining us as well. So I’ll just finish off with a message to any of our listeners. If they do wish to learn more about Janus Henderson’s views on thematic investing, or if you have any other questions, then please don’t hesitate to reach out to your client relationship manager or visit our website. So with that, thank you and goodbye.

Bottom-up investing means building portfolios by focusing on the analysis of individual securities, in order to identify the best opportunities in an industry or country/region. The opposite of top-down investing.

CPI (Consumer price index) is a measure that examines the price change of a basket of consumer goods and services over time. It is used to estimate ‘inflation’. Headline CPI or inflation is a calculation of total inflation in an economy, and include items such as food and energy, in which prices tend to be more prone to change (volatile).

FAANG is an acronym referring to the stocks of five prominent American technology companies: Meta (formerly known as Facebook), Amazon, Apple, Netflix, and Alphabet (formerly known as Google). The term originated in 2013 to group the dominant technology stocks of the time. Apple was added in 2017.

PPI (Producer price index) is a measure that examines the average change over time in the prices domestic producers receive for their output. It measures inflation at the wholesale level across industry and product categories.

Top-down investing means building a portfolio based mainly on the economic environment and asset allocation decisions. This contrasts with bottom-up investing.


References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.

Technology industries can be significantly affected by obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. A concentrated investment in a single industry could be more volatile than the performance of less concentrated investments and the market as a whole.

Diversification neither assures a profit not elimiates the risk of experiencing investment losses.

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.


Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.


The information in this article does not qualify as an investment recommendation.


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Matthew Bullock

Matthew Bullock

EMEA Head of Portfolio Construction and Strategy

Richard Clode, CFA

Richard Clode, CFA

Portfolio Manager

20 Sep 2023
14 minute listen

Key takeaways:

  • Unpredictable news flow and an acceleration in the pace of change risks whipsawing investors. Thematics provides a longer-term framework with which to assess the changes in which you have genuine conviction.
  • From an investment perspective, it is not enough to identify themes. Marrying top-down and bottom-up views is critical in identifying the winners of tomorrow.
  • Successful thematic investing requires decades of expertise and means repositioning portfolios at inflection points. We are currently at pivotal points across a number of industries with exciting opportunities from a changing of the guard.