WisdomTree: Benelux professional investors look to AI for long-term growth opportunities

18 november 2020

Thematic allocations expected to increase over 12 months, survey finds.

A survey commissioned by WisdomTree[1], the exchange traded fund ("ETF") and exchange traded product ("ETP") sponsor, has revealed European professional investors currently believe artificial intelligence (AI) presents the most compelling long-term thematic investment opportunity.

The survey, conducted by CoreData Research an independent research agency, polled 440 professional investors across Europe, ranging from wholesale financial advisory firms to wealth managers and family offices. The investors surveyed are responsible for approximately €240bn in assets under management.

The survey reveals a consensus across Benelux professional investors, with more than seven in 10 (73%) believing that AI presents the most compelling long-term thematic investment opportunity. With AI being in the early stages of its adoption and application, professional investors clearly believe in the potential of the technology which is expected to significantly transform industries, services, labour, and consumption.

Themes closely related to tackling and working through the Coronavirus pandemic were the second and third most compelling long-term opportunities. With the pandemic at the forefront of investors’ minds, the race for the first coronavirus vaccine and the innovation behind vaccine research resulted in Biotech (60%) being the second most compelling thematic investment opportunity amongst the professional investors surveyed.

The move to home working, brought on the pandemic, resulted in cyber security (47%) being selected as the third most compelling long-term thematic investment opportunity. Results reinforce the idea that technology used by employees is more vulnerable outside of the office network and the cost of data breaches continues to rise. Investors appear to anticipate growing demand for cyber security which is critical in protecting hardware, software and data from cyber threats.

Artificial intelligence, biotech, cyber security and cloud computing, among other thematic sectors, could be set to see significant interest in the next 12 months, with more than three in four (77%) professional investors surveyed expecting to increase their thematic equity allocations over the period. Cloud computing in particular is powerful as an infrastructure that allows for those other themes to grow and expand in more influential ways.

Investing in thematic sectors can be challenging as often there isn’t a ‘screen-able’ technique or a simple methodology to identify the top publicly listed companies in a sector like cloud computing or artificial intelligence.  As a result, thematic and specialist sector strategies previously only accessible through actively managed funds are now seeing innovation from ETF sponsors.

Sihem Labbas, Head of French Speaking Regions, WisdomTree said: “Our research points to the growing popularity of thematic investing, which has benefitted from strong returns during the coronavirus pandemic. While AI, biotech and cyber security present compelling long-term opportunities, cloud computing has had a strong year as organisations have transitioned to the cloud quicker than experts anticipated. Once seen as a fad, thematics are becoming important building blocks in portfolio construction due to their long-term growth potential”.

Christopher Gannatti, Head of Research, Europe, WisdomTree added: “Due to the challenging nature of thematic investing, we believe a differentiated and thoughtful approach to providing thematic exposures via ETFs is to build indices with sector experts. Constructing indices in this manner can provide the concentrated, pure play exposure an investor would come to expect from a sector specialist active manager, but with all the benefits of the ETF wrapper.

“As investors look to add high growth specific allocations to portfolios, we expect the popularity of thematic equities that provide differentiated exposures to continue growing. Product development and innovation are key to standing out in such a competitive corner of the market. Over time, WisdomTree will continue to build thematic strategies which leverage innovative approaches and address investor needs”.

[1] Source: CoreData, WisdomTree Pan European Adviser Study 2020, August 2020