The fund managers believe a “top-down” approach is the most appropriate in identifying episodes of change, their drivers and the resultant investment opportunities. In their view, this objective cannot be attained with a “bottom-up” or company specific approach.
Macro-Thematic investment opportunities exist because investors are bad at discounting the kind of change that defines Macro-Themes. Investors suffer from behavioural biases including herding, forecasting bias and cognitive bias. This leads to a gap between investment theory – based on the idea that investors are rational in aggregate and that asset prices efficiently discount all available information – and practice.
Importantly, a Macro-Theme may be expressed in both positive and negative terms. The fund managers have courage in their convictions: positive themes are supported by large absolute portfolio weightings whereas negative themes may result in the complete absence from the portfolio of certain stockmarket sectors.