Some conversations happen and are quickly forgotten, while others stay with us for years. Is it the quality of the content that makes us remember, or is it the presentation? We think it’s a combination of both. Great information packaged in a way that is difficult to engage with is more likely to be forgotten. Conversely, if that same information is packaged as a compelling story, the messages are likely to stick. For investors, we refer to this concept as Conversational Alpha®, where relatable narratives are created to help investors pursue their long-term investment goals.
We believe thematic equity can generate Conversational Alpha® because it targets innovation with the potential to cause structural disruption that investors can relate with. But what level of exposure is appropriate? There are several key factors to consider when developing a framework for exposure to thematic equity. This blog post outlines these considerations by highlighting the diversification benefits thematic equity can provide and tools that can assist financial advisors when establishing upper limits on thematic equity exposure.