Major global trends powered by technological advances, demographic shifts and the energy transition, among other forces, are creating structural growth opportunities across economies and markets. Active thematic global equities is an investment strategy that taps into these long-term trends — known as megatrends — underpinning industries and companies that aims to deliver alpha for institutional allocators. This forward-looking approach can provide long-term investors with diversification beyond traditional equity allocations.

The Guide highlights the key megatrends that support thematic equity investing, with a deeper look at two major themes today. It discusses the research, data and benchmarking approach and how active management is integral to managing and future-proofing portfolios. It also explains how a customized approach to active thematic global equities can address different institutional portfolio objectives.

In this Guide, Pictet Asset Management — a pioneer in thematic global equities since 1995 — shares its disciplined, rigorous and active investment approach. It has over 70 investment professionals managing approximately $71 billion in assets within thematic equities.¹

I

THE MEGATRENDS FRAMEWORK

Megatrends are socioeconomic, environmental and technological forces that are reshaping global economies. Examples include the integration of digital technologies and virtual platforms, increasing urbanization, and the depletion of natural resources.

These trends have commercial implications. For businesses that can exploit them, they can be a source of long-term revenue and earnings growth; for firms that ignore them, they can represent existential threats.

“We use megatrends to define a distinct investment universe of thematic stocks,” said Steve Freedman, Head of Research and Sustainability, Thematic Equities, Pictet Asset Management.

Thematic equity investing, he explained, is an approach that identifies and targets industries and companies that are supported by megatrends. It is also index unconstrained and research intensive, which is a reason why more institutional investors are considering a thematic equity strategy.² These investors are drawn to thematic equities’ potential to deliver alpha and provide diversification.

The investment approach requires a deep understanding of complex economic and noneconomic phenomena. Ongoing research to track the evolution and impact of megatrends is part of Pictet Asset Management’s thematic investment process — and it requires resources on a scale that may not be possible for all asset managers.

Pictet Asset Management has used the megatrend framework for decades. The framework, developed in partnership with the Copenhagen Institute for Futures Studies (CIFS), an independent think tank, has identified and continuously monitors 21 megatrends. These megatrends are grouped into six clusters: technology and science, the environment, global governance, demography, the economy and society.

An important element along the journey was the adoption of the megatrends framework to identify long-term secular growth drivers. That has allowed us to develop this franchise in a consistent way.

Steve Freedman

Head of Research and Sustainability, Thematic Equities, Pictet Asset Management

The first step involves determining the extent to which each megatrend acts as a secular growth driver for each segment of a thematic universe. This analysis is conducted by the investment teams, sometimes with the involvement of CIFS and the respective thematic advisory board. The results are then aggregated at portfolio level, and the five to eight most significant megatrends are selected.

Megatrends Framework 

Source: Pictet Asset Management, 2025

In a second step, the evolution of the selected megatrends is tracked by using indicators relevant to each theme. While this is not a high frequency process — relevant data are usually annual at best — it can serve as a basis for validating the long-term investment thesis for segments of the themes and for making adjustments to thematic universes over time.

An important feature of Pictet Asset Management’s thematic franchise is its use of thematic advisory boards. Each thematic strategy has its own advisory board composed of outside experts from industry, academia and public policy who meet with the investment teams on a regular basis. The role of the board members is not to advise on specific investment decisions, and they do not help managers select stocks for their portfolio. Rather, they support investment managers by providing insights on how shifts in megatrends can have broader thematic and investment ramifications, as they have the domain expertise to discover disruptions and opportunities that are not always well known or covered in standard investment research.

Advisory boards help track the long-term course of a theme and give specific insights on shorter-term developments too. For instance, they offer analyses of where exactly an industry segment is positioned in the business cycle. Similarly, they provide insights into how a particular shock, such as supply chain shortages, might affect specific types of companies. Longer-term insights from the advisory boards have included impacts of artificial intelligence across several parts of the economy as well as the disruptive potential of GLP-1 drugs, which treat type 2 diabetes and have more recently started being used for weight loss, among other related areas.

Read More: Thematic equity: The active element of a global stock portfolio

II

THEMES AS A SOURCE OF ALPHA

Readers of the financial press could be forgiven for thinking that active investing isn’t worth the time and effort. One prevailing view is that, as stock prices now accurately capture all available information, investors should abandon their pursuit of alpha altogether.

There is growing conviction that thematic equities offer exposure to faster growing segments of the market that are clearly differentiated from traditional, long-only equity.

Gertjan van der Geer

Senior Investment Manager, Thematic Equities, Pictet Asset Management

It’s a persuasive argument, but it would be wrong to claim that long-only active equity investment has outlived its usefulness. In fact, research shows that a fair proportion of active equity strategies do distinguish themselves over time.³ When investment managers stay true to their very strongest convictions and avoid holding stocks simply to alter a portfolio’s tracking error, such strategies can deliver. This helps explain why a growing number of institutional investors are considering allocating more of their capital to active thematic equities, an approach that is both research intensive and index agnostic.⁴

Using the megatrend framework model, Pictet Asset Management has identified 15 distinct investible universes — clusters of economic activity that are composed of companies with above-average growth prospects. Among the universes is energy transition. Pictet Asset Management’s analysis shows that firms that form part of the energy transition supply chain operate in an environment in which structural forces of change abound.

A transition led by competitive forces and improving economics due to ongoing advances in clean technology, for example, will not only lift the fortunes of utility companies but also those of firms supplying the hardware and software required to electrify big industry and transport.

Megatrends underpinning the Clean Energy Transition theme

Source: Pictet Asset Management, 2025

Another area that is both undergoing a rapid transformation and presents a rich variety of investment opportunities is robotics. Here, advances in artificial intelligence are accelerating the spread of automation technology into more parts of everyday life, whether that’s in the home, in the office or on the factory floor.

Healthcare companies are also seeing their prospects brighten courtesy of powerful structural trends. Advances in technologies such as AI promise to improve diagnostics and accelerate drug development. Simultaneously, a longer living population and the growth of the middle class in emerging markets should boost demand for healthcare and diagnostic services for years to come. According to Pictet Asset Management’s forecasts, returns from each of these three thematic universes could exceed those of the MSCI World Index by as much as 20 per cent over the next five years.⁵

III

FEATURES OF THE THEMATIC UNIVERSE

Large opportunity set: By Pictet Asset Management’s estimates, there are up to 2,000 listed firms that qualify as thematic investments.⁶ That compares with 1,400 companies represented in the MSCI All Country World Index. This large investable universe for thematic global equities allows for diversification in the equity portfolio.

Specialized companies: Thematic investing focuses on companies that are specialized in their business activities. For example, “pure play” firms make up a significant part of the investible market. Pictet Asset Management’s thematic equities team’s decision to favor pure-play companies over more diversified ones is supported by research indicating they deliver better long-term investment results.⁷

Benchmark agnostic: Another key differentiator versus mainstream equity investing is that thematic equity portfolios do not track any standard market benchmark. Instead, investment managers have the freedom to select stocks without having to be constrained by the tracking error versus a benchmark index.

The performance of Pictet Asset Management’s active thematic global equity portfolios can be tracked by using a broad global equity index such as the MSCI All Country World Index as a reference point.

Long termism: “The biggest opportunity [of thematic global equities] is to benefit from true long-termism. We buy when others are scared and sell when markets become irrationally exuberant,” said Gertjan van der Geer, Senior Investment Manager, Thematic Equities, Pictet Asset Management.

Judging the performance of the strategy means not only choosing the right benchmark but also the right time frame over a long-term cycle. That makes thematic global equities appropriate for investors that are able to take a longer-term investment horizon.

Allocators are drawn to thematic global equities for diversification beyond standard equity benchmarks. This diversification comes from not just the style and segments represented, but the philosophy behind thematic investing.

An index represents what was successful in the past. This makes index investing, by definition, backward looking. Thematic investing, however, is inherently forward looking. “It’s a different mindset,” van der Geer said. “It looks at what is expected to become important in the coming decades, which will determine the index composition of tomorrow. It’s a completely different way of looking at investing.”

IV

CASE STUDIES

Active thematic investing’s rigorous and multidimensional approach can be illustrated by taking a closer look at the investment dynamics of two of Pictet Asset Management’s thematic strategies: Clean Energy Transition and Digital.

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Clean Energy Transition Theme

Energy transition marks an unprecedented economic shift that will give rise to numerous investment opportunities. It is a transformation that is being powered by multiple megatrends: environmental, technological, economic and geopolitical.

The Energy Trilemma

Source: Pictet Asset Management, 2025

Changing the world’s whole energy mix to something that is much more efficient, cleaner and cheaper is a huge challenge, but feasible. This is because advances in technology, rather than government subsidies, have made it more cost-effective to build new wind or solar farms than to continue operating gas or coal power plants. As investments in renewables increase, the unit cost of electricity generated decreases because of downward-sloping cost curves. Besides lower cost, rising geopolitical tensions can encourage countries to increase the use of renewables, reducing their energy dependance on other countries.

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Across the value chain

Though some investors may see the clean energy transition as synonymous with renewables, Pictet Asset Management takes a holistic view that considers investible opportunities from an expanded investment universe. In addition to renewables, this thematic strategy includes, for example, companies that provide better insulation materials, which helps reduce energy use, and improved batteries, which enable the transition. Another source of investment opportunity is within the semiconductor industry. The portfolio invests in companies that produce the most energy-efficient chips, along with companies that provide tools to manufacture them, which is critical given the size of this industry and its energy needs.

We invest across the whole clean energy transition value chain. We focus on companies that are profitable and growing, and we focus on proven technologies.

Manuel Losa

Senior Investment Manager, Thematic Equities, Pictet Asset Management

Investment managers of the Clean Energy Transition (CET) strategy select high-quality companies using a robust risk assessment process. They deliberately avoid emerging technologies that are not yet economic and which are typically small cap. They also shy away from companies that sell older, established clean energy technologies, firms that tend to be mega cap, explained Manuel Losa, Senior Investment Manager, Thematic Equities, Pictet Asset Management. Although older technologies may still be profitable, they have limited growth potential.

Read: The investment dynamics of the clean energy supply chain

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Portfolio characteristics

Investing across the entire energy ecosystem means that the composition of Pictet Asset Management’s Clean Energy Transition portfolio is very different from most clean energy exchange-traded funds (ETFs), which are typically weighted toward companies that provide renewables. Focusing on clean energy enabling technologies in industries such as the semiconductor industry requires a strong understanding of the megatrends that underpin the clean energy transition. For example, Pictet Asset Management’s team responsible for the CET strategy was able to identify early on how the enormous energy requirements of artificial intelligence would be an important driver for clean energy, as data centers require significant energy to run the chips as well as cooling power because chips don’t work well at high temperatures. According to executives from Arm Holdings,⁸ “AI could account for 25% of the US electricity demand if there is no improvement in energy efficiency,” Losa said, adding that over 50% of its energy transition portfolio is exposed to data centers.

This holistic approach also enables the portfolio to rotate easily from one area of the clean energy value chain to another, depending on valuations. “There was a rally in renewables in 2020 and 2021. We took profits from that and shifted into semiconductors,” Losa noted. In contrast, clean energy ETFs, by definition, remain invested in renewables, can’t take profits, and don’t rotate.

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The Digital Theme

Because of our thematic approach to technology, we can offer different drivers to our clients. It’s not technology for the sake of technology, but rather we focus on digitalization and the digital economy, which is where the value lies.

Charles Lepetitpas

Senior Investment Manager, Thematic Equities, Pictet Asset Management

The digitalization of the economy is also generating a host of investment opportunities. Four megatrends in particular are fueling the industry’s growth. These are AI; improvements in computing power; demographic changes, such as the expanding digital activities of younger generations; and the rise of a new service economy, such as ride sharing. Pictet Asset Management segments the Digital strategy’s investment universe into three broad categories: consumer (including e-commerce and entertainment); enterprise (software and online advertising); and enabling technology (semiconductors).

While the thematic Digital universe is inhabited by a large group of companies, portfolio managers produce a shortlist for potential investment. This winnowing process involves quantitative screening, including a fundamental analysis, with an overall focus on growth, quality and resilience, explained Charles Lepetitpas, Senior Investment Manager, Thematic Equities, Pictet Asset Management.

Defining the Digital Theme 

Investing in companies that leverage data, technology and online platforms to deliver innovative products and services in the digital economy and the companies that enable them. 
Source: Pictet Asset Management, 2025

In addition to conducting rigorous bottom-up research, frequent interactions with the most senior digital leaders in Silicon Valley and across the globe enable the Digital thematics team to closely monitor industry developments. Many members of Pictet Asset Management’s long-standing Thematic Advisory Boards also have a background in private equity or venture capital that helps spot developing trends. For instance, the Digital Advisory Board identified generative AI as an opportunity well in advance of most investors. “We were able to understand that it was real and not just a fad. As a result, we had a high level of conviction in some of the companies benefiting from this trend,” Lepetitpas said.

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Portfolio characteristics

The result of this distinctive investment process is a differentiated Digital thematic portfolio with a high active share. It’s not benchmarked against standard indices, and it’s unconstrained in terms of region, sector and market capitalization.

More than two-thirds of Pictet Asset Management’s Digital portfolio is invested in U.S. companies that were initially funded by venture capital before being publicly listed, and part of the portfolio is invested in Asian companies, which is an important geography for semiconductors. The portfolio tends to exhibit a mid-cap tilt, but also has significant mega-cap exposure, mainly through holdings of Nvidia and Amazon. The portfolio’s growth orientation is another characteristic. “We look for companies with an opportunity to grow above consensus and with durability, but we are not overpaying for growth — it’s growth at a reasonable price,” Lepetitpas said.

This distinct portfolio approach provides a differentiated risk-return profile compared with the standard tech holdings of traditional global equity managers that use conventional tech benchmarks. Amazon, for example, is not included in MSCI’s technology indices, and most technology-focused active mandates following this benchmark would not hold it. Yet Amazon is one of Pictet Asset Management’s top Digital positions, as it is one of the primary beneficiaries of overarching megatrends that include the shift to online commerce.

The Digital strategy, launched in 2008, is among Pictet Asset Management’s longest-running thematic strategies. “Because we have a long-term mindset, we can resist the temptation of short-term fads and focus on durable trends,” Lepetitpas said.

Section IV footnote 
⁸ https://newsroom.arm.com/blog/driving-ai-datacenter-compute-efficiency

V

THEMATICS, SUSTAINABILITY AND IMPACT

Thematic investing and sustainable investing are not synonymous. The latter incorporates environmental, social and governance factors. Some ESG strategies may not be thematic, such as those that only deploy negative ESG screening, and some thematic approaches available on the market don’t incorporate ESG.

Thematic vs ESG investing

Source: Pictet Asset Management, 2025

Most of Pictet Asset Management’s active thematic global equity strategies aim to achieve a positive environmental and societal impact. Examples include clean energy, water and other environmental solutions. Some themes that are not explicitly sustainable may still have a strong ESG component. For example, its Premium Brands strategy focuses on consumer goods companies that incorporate ESG criteria.

Traditional ESG integration is screening the ‘how.’ The typical thematic investment approach is more about the ‘what.’

Steve Freedman

Head of Research and Sustainability, Thematic Equities, Pictet Asset Management

Thematic investing is also distinct from traditional impact investing — which pursues a specific and measurable environmental and social goal alongside financial returns. That said, thematic strategies that may have an environmental or societal focus are also able to fulfill the twin goals of the impact approach.

Read: Thematic equities as impact investments 

Pictet Asset Management’s tradition of impact investing is part of its sustainably aligned approach. That includes its Global Environmental Opportunities (GEO) strategy, launched in 2014, and more recently, its ReGeneration strategy, focused on a more resilient society.

An asset manager’s sustainability and impact investing initiatives need to go beyond selecting and monitoring the companies within its portfolio. In this regard, Pictet Asset Management’s broader approach is based on companies achieving targets that are material to shareholders and to encourage changes that may not have been previously considered. “Because we engage with a broad range of companies, we can provide feedback on best practices to management teams” said Manuel Losa, Senior Investment Manager, Thematic Equities, Pictet Asset Management.

Often the engagement is focused on aligning key performance indicators and management remuneration. In one example, a company’s management was not incentivized to invest in renewables, which Pictet Asset Management’s investment managers considered as value accretive and a source of positive financial returns. For this company, investing in renewables “was better from an environmental perspective, from an affordability perspective, from a strategic point of view and from a political perspective,” said Losa, who, with his team, asked the company’s management to change its remuneration to support renewables, which they did. “Sometimes you just need to explain why the change makes sense.”

VI

CUSTOMIZATION

Increasingly, institutional allocators are seeking customized investment approaches that can meet their specific portfolio needs — and that is also true for thematic global equities. An active thematics manager can create bespoke portfolios that address a wide variety of institutional preferences for exposures to specific themes, segments within a theme, or even single stock exclusions.

“Allocators are looking for broader-based portions of their portfolios to focus on long-term investment themes, and there is much more demand for bespoke portfolios that combine certain themes for a specific objective or that have certain characteristics,” said Gertjan van der Geer, Senior Investment Manager, Thematic Equities, Pictet Asset Management. “Exclusions are easier to accomplish in bespoke portfolios. It’s a flexible way of keeping the portfolio in line with the objectives of clients.”

Pictet Asset Management can structure bespoke thematic portfolios across a very wide spectrum spanning its 21 megatrends and thematic framework. For instance, creating a sustainability portfolio that includes ESG factors and active ownership goals.

Clients might be looking for a specific thematic exposure they cannot find in the market. We can build a bespoke portfolio by combining segments that an institution seeks to highlight from existing strategies.

Gertjan van der Geer

Senior Investment Manager of Thematic Equities, Pictet Asset Management

Single-themed strategies can offer exposure to market segments that benefit from long-term growth, but there are good reasons for investors to consider a multi-themed approach — notably the ability to make tactical shifts within a wider investible universe. “A multi-themed approach allows the manager to invest in a variety of thematic segments. They can increase or decrease exposures to those segments based on how attractive they are at each moment,” said van der Geer.

Also, the multi-themed approach can be appealing to an institution that wants to allocate a portion of its portfolio to future-focused thematics but does not have a strong opinion on which themes to favor. In addition, bespoke portfolios can adapt to an institution’s evolving investment parameters over time.

Pictet Asset Management approaches customization in several ways. It can adapt an existing strategy to meet a specific client mandate to include or limit certain market segments. Or it could create custom thematic exposures that aren’t readily available in the market. Examples include a custom portfolio that combines elements of its Global Environmental Opportunities and Clean Energy Transition strategies.

Thematic portfolios can also be built to be more responsive to and complement each client’s expertise on certain themes. “It’s important to not simply offer ‘take it or leave it’ portfolios, but to create solutions that are customized to align with the way an investor defines the themes,” said Steve Freedman, Head of Research and Sustainability, Thematic Equities, Pictet Asset Management.

Whether it is an existing thematic equity portfolio or a bespoke version, investors should carefully consider sector risk — with certain sectors overrepresented when compared with a standard global index — and style risk.

“As we look for pockets of growth that are supported by long-term megatrends, thematic tilts come with the territory and our strategies tend to have growth and quality biases,” said van der Geer. Sectors like information technology, energy, consumer discretionary and healthcare capture more of the thematic tailwinds than other sectors, leading to overrepresentation of these sectors in thematic equity portfolios.

“Those are all areas we want to embrace, because that’s exactly where the growth opportunities are,” he said, adding that Pictet Asset Management monitors the tracking error of its thematic portfolios against the overall market. “We find that on average, if we are well diversified over different thematic segments, sector risk in a multi-thematic portfolio is significantly diminished and it’s very manageable.”

Ultimately, active thematic global equities position investment portfolios to capture future opportunities. “Thematic investing offers a way to future-proof part of the portfolio,” van der Geer said, made possible by the megatrends framework and its identification of long-term growth drivers.

VII

ADDITIONAL RESOURCES

Read: Costing the Earth: measuring corporations' impact on biodiversity loss

Read: Planetary Boundaries: measuring the business world’s environmental footprint

VIII

Quiz

Test your knowledge on active thematic investments based on the information provided in this Guide. It offers a brief recap of key areas of information related to active thematic investments.

IX

GLOSSARY

Active thematic equities 
An actively managed equity strategy that invests in companies profiting from structural forces of change that evolve independently of the economic cycle. It identifies investment themes from these long-term megatrends across societies and the environment that create long-term sources of alpha.

Alpha 
The excess, or abnormal, rate of return in relation to a financial benchmark, such as an index, when adjusted for risk. Alpha is often used with beta, which measures a broad market’s overall risk-adjusted performance, or systematic risk.

Artificial intelligence 
Technology that enables computers and machines to perform tasks commonly associated with human beings, including learning, comprehension, problem solving, decision-making and creativity. Generative AI, machine learning and deep learning are types of artificial intelligence.

Clean energy transition 
An investment theme based on the process of shifting energy production away from fossil fuels to sources such as wind and solar that produce little or no greenhouse gas emissions. Please click here for more details.

Digital 
Economic activity — usually based on online transactions, data-driven decision-making and automation — that uses digital technologies to create, market or consume goods and services.

Engagement 
A proactive process in which stakeholders interact with company management to influence how the company is run. May include discussions about environmental policy and disclosure, goal setting, board structure and executive compensation.

Exclusionary screening 
An investing approach to exclude companies, countries or other issuers based on activities considered uninvestible. Exclusion criteria can be products (for example, weapons or tobacco), activities (animal testing) or business practices (human rights violations or corruption). Also called negative screening. Please refer to Pictet Asset Management’s responsible investment policy for more details.

Megatrend 
An important structural force in society and the economy that evolves independently of an economic cycle over a long-term horizon. It could be environmental, technological or societal, among other forces. Examples are climate change, digitalization, globalization and urbanization. For more insights on Pictet Asset Management’s framework, please here.

Thematic investing 
A research-based investment approach that is based on underlying megatrends — long-term macroeconomic, geopolitical, technological and cultural trends.

Tracking error 
The difference between the price movements of an investment position or portfolio and the price movements of the benchmark, such as the S&P 500 index.