Thematic Indexes: Expanding Dimensions of Indexing

Abstract

Over the Past two decades, the explosion in passive management assets has occurred at an unprecedented speed. Along the way, indexing itself has seen multiple innovations in terms of the asset classes it covers, from traditional equities and fixed income to more opaque assets, such as real estate investments, more volatile assets, such as cryptocurrencies, and slower moving assets, such as art. Investment strategies have expanded from geographic and sector investing to more forward-looking metrics, such as Thematics. Thematic indexes are based on the idea that while sector classifications are important and core to measuring and benchmarking investment strategies, the potential for alpha can come in, proactively defining disruptive business models that are based on similar sources of top-down macro drivers.