Pictet Launches Megatrends Fund

Pictet is launching what it claims is a first-of-its-kind 'megatrends' fund that includes exposure to its water, clean energy and timber investment themes.

The Swiss private bank is hoping to raise €1 billion ($1.27 billion) into the Global Megatrends Selection Fund, which is aimed at retail investors across Europe.

The fund will invest on an equally weighted basis across eight themes, against which Pictet is already running thematic funds. These are biotech, digital communications, security, generic pharmaceuticals and premium brands, in addition to the three environmental themes.

“Pictet has identified these as [creating] persistant, secular changes in structural factors (such as demographics, lifestyle, regulation and the environment) which have the potential for long-term growth,” the company said.

I attended the launch of Pictet's Timber Fund in September 2008, and since inception it has only attracted around €10 million, so it will be interesting to see if the combination of these themes can achieve more attraction.  Pictet's Timber Fund is not a pure timber play however, as it invests in companies along the timber value chain, but it is more desirable to invest directly in timberland via a Timberland Investment Management Organization (TIMO) or REIT, although there is a trade-off with regards to liquidity.  A analysis of the merits of investing in timberland is detailed in my first post Money Does Grow on Trees.

Each month, the fund will be rebalanced, selling out of those themes which have overperformed and increasing investments in those that have underperformed, aiming to reduce its exposure to overvalued stocks.

The company – whose asset management subsidiary manages Sfr115 billion ($98 billion) – claims to have been a pioneer in thematic investing, launching its first such fund, a biotech fund, in 1995.

These existing themed funds invest in a mix of market capitalisations, typically a third large-cap, with the rest small- and mid-cap companies. 

The Megatrends fund – which is benchmarked to the MSCI World index – is not structured as a fund of funds, but will be invested alongside the existing funds, avoiding the ‘double charging’ of most fund of funds. It carries an administration fee of 1.6%.

Paul Gaston, head of UK sales, said that the fund is a “unique proposition” in the retail market, but it is likely to compete with Goldman Sachs’ recently launched Sustain fund product. That fund similarly combines demographic, environmental and social themes in a global mixed-cap equity portfolio.