Building a multi-thematic portfolio can be challenging as there are many pitfalls that can lead to subpar results. An overly concentrated portfolio, a lack of control around the allocation between themes, a lack of focus on smaller, high-potential companies or a lack of discipline and expertise in stock selection can all diminish or even erase the impact of thematic investments. In April 2021, we published ‘Thematic Universe: How to harness the power of megatrends in your portfolio’, our first Thematic white paper. This research paper introduced WisdomTree’s Thematic Classification system that organises more than two thousand funds and exchange-traded funds (ETFs) into 45 themes and also proposed a qualitative and quantitative framework to select thematic strategies.

To build on our first Thematic paper, we have published our second thematic white paper: Investing in the world’s future: The efficient use of thematic investment in a portfolio. In this paper, we dig further into the best way to use Thematic investments in a portfolio. We focus on four topics:

1. Why a theme-based investment approach can boost long-term performance
   
   
2. How to build a thematic portfolio: 3 layers of alpha generation
   
   
3. Targeting maximum growth with a diversified multi thematic portfolio
   
   
4. Multi thematic strategies: An integral part of a multi asset portfolio

Key takeaways from our research:

• Thematic growth is not shared equally across all the stocks in the theme. It is a ‘winners take all’ world.
  
  
• Thematic investments are long-term endeavours, however, a tactical overlay using momentum can help create extra performance in a multi-thematic portfolio and this is where investors can use theme-specific dynamics to their advantage.
  
  
• Careful thematic stock selection, based on pure play stocks, expert-selected, is fundamental and allows further improvement of the growth potential of the overall strategy but also enables investors to cast a wide net across the different themes to maximise the chances of picking the future winners in each theme.