Syfe Themes: How We Built 5 Thematic Portfolios That Help You Invest In The Future

Do you believe in the environment and climate change? Or that advances in genomics and biotechnology will shape the future of healthcare? To express these beliefs and worldviews, you might have adapted your lifestyle or chosen a particular career path. Shouldn’t your investments reflect the same?

Thematic investing lets you do just that. It is an approach that enables you to align your personal values and convictions with your investment preferences.

With thematic portfolios, you can invest in a big idea or megatrend that capitalises on long-term structural shifts such as disruptive technologies, sustainability, changing demographics, and China’s evolving economy.  

These megatrends form the basis of Syfe Themes, a collection of five new thematic portfolios. Each portfolio lets you invest in a carefully curated set of ETFs aligned to a specific trend:

  • Disruptive Technology: Companies focused on innovations like robotics, artificial intelligence and cloud computing
  • Healthcare Innovation: Investments focused on healthcare advancements such as genomics, biotechnology, and pharmaceuticals
  • China Growth: Stocks aligned to companies in China’s growing tech and consumer sectors
  • Global Income: Investment-grade and high-yield corporate and government bonds that offer high yields
Snapshot of Syfe’s ESG & Clean Energy and Disruptive Technology portfolios

The power of thematic investing

Thematic investing seeks to benefit from the emergence of powerful structural trends. This quote from Towers Watson sums it up best:

“Thematic investing is about capitalizing on future trends. Its forward-looking nature stands in clear contrast to the more widely used market capitalization approach [which] assumes that past winners will continue to win out… Why is thematic investing a good idea? In a rapidly changing business environment, the winners will be those that anticipate trends and take advantage of new opportunities.”

How do Syfe’s thematic portfolios work?

The five Syfe Theme portfolios are designed to complement our Core and REIT+ portfolios. For instance, you may get exposure to a broadly diversified mix of stocks, bonds and gold through the Core Growth portfolio, and then add the ESG & Clean Energy portfolio as a secondary holding to capitalise on the sustainability movement. 

The former serves as your “core” allocation while the latter functions as a “satellite” in an investment approach known as a core-satellite strategy

You may add as many thematic portfolios to your core holdings as you prefer to further personalise your overall portfolio. 

Our portfolio methodology 

Our starting universe of possible investments comprise over 100 carefully selected ETFs that are low-cost, highly liquid and track their benchmarks closely. These are the same ETFs that make up the possible holdings for Syfe Custom portfolios.

Each ETF is then classified into broad themes and given a risk score between 1 to 5 based on its underlying asset class, geography and sector exposures, with 5 being the highest risk score.

ETFs that best represent our theme and offer the best potential for risk-adjusted returns are then selected for possible inclusion. Thereafter, we use a methodology known as asset class risk budgeting to construct and manage the portfolio. 

This approach involves first determining the amount of risk the portfolio should hold, and then allocating the risk over the different underlying assets (the “risk budgets”). Next, we formulate a strategic asset allocation by selecting the portfolio weights that meet the risk budgets. 

Here’s a simplified illustration of how this works. Let’s say the overall risk of a portfolio should be 100 units and we have five underlying ETFs. Each ETF is assigned a risk budget of 20 units. To determine their portfolio weights, we take into consideration several factors including each ETF’s risk score. An ETF with a lower risk score is given more weight compared to one with a higher risk rating, as shown below.

Simplified example of portfolio optimisation using asset class risk budgeting

In reality, risk budgeting is a complex process requiring continuous data, statistical analysis and technical expertise. By constructing portfolios using an asset class risk budgeting method and taking into account each asset’s risk score (i.e. the volatility of the asset), we minimise portfolio risk for clients and help maximise risk-adjusted returns. 

As with all Syfe portfolios, your thematic portfolio will be constantly monitored and rebalanced twice a year. Our investment team keeps watch on all new emerging trends for possible inclusion in the portfolio. As such, new ETFs may be added to your portfolio should they be identified as a good thematic fit.

Invest your way 

Have other investment convictions you want to express? You can build your own portfolio with a Syfe Custom portfolio. Choose from over 100 curated ETFs to personalize your portfolio. 

Whether you choose from our thematic portfolios or design your own, you can start investing with no minimum amount and no lock-in period. Plus, enjoy the flexibility of withdrawing your funds anytime. We’ll manage your portfolio for you, from dividend reinvestment to automatic rebalancing, all for low fees starting from 0.35% per year. 

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