Regional / Thematic

Be it Asia’s Tiger Economies which recorded stunning economic growth between the early 1960s and 1990s, or the “BRICS” club comprising Brazil, Russia, India, China and South Africa that attracted wide-spread attention in the early 2000s, investors always have had a fascination with region-based investing narratives.

  • The desire to ride the “next big thing” – essentially hoping to generate superior returns by gaining exposure to a fast-growing region – remains, thus explaining the persisting demand and popularity of so-called “regional funds”.
  • These investment vehicles are typically mutual funds that invest almost exclusively in the securities of companies – spanning various sectors – based in a region. A regional fund for Indian subcontinent, for instance, will have a mandate to place bets on Indian and neighboring investing assets only, such as local listed equities, sovereign debt, corporate loans, etc.
  • While such an overwhelming concentration of the portfolio in a single region can potentially generate high returns, such a strategy also has to contend with price volatility and economic, political and business risks associated with the given area.

In contrast, thematic investing represents a conviction in a specific macroeconomic, geopolitical or technological trend – either nascent or well-established, or fast-evolving and rapidly accelerating one – that offers attractive opportunities to generate disproportionate returns.

So, think of structural, transformative trends such as “smart cities”, fintech, decarbonization, climate change, “experience economy”, “everything as a service” and so on.

Based on the given theme, the fund manager typically selects the companies they consider to be well-poised to capitalize on the resulting business opportunity. For example, if it’s a “green economy” fund, then the companies disrupting different facets of the current business landscape will be part of the consideration set. That means firms dealing in renewable energy, electric vehicles, battery storage technologies, decarbonisation technology, etc.