Technological, demographic, and geopolitical shifts create disruption and uncertainty, but they also present prime opportunities for long-term investors.
A thematic investment approach aims to take advantage of market changes by targeting the megatrends that are expected to drive market performance over the coming decades. This is a departure from traditional approaches that are anchored to benchmarks, regions, or sectors. As younger investors increasingly advocate for a thematic investment architecture, the wealth management industry is pivoting to keep up.
Generational Wealth Transfer
Younger investors are also inheriting wealth from older generations at a growing rate, leading to a sea change in the investment advisory world. In the US alone, experts forecast a “great wealth transfer” of more than $120tn over the next 25 years.1 This trend is critical for financial advisors to consider, as research shows that only 13 percent of investors retain their advisor when money passes hands.2
At the same time, thematic investing is front of mind for the generation that will be inheriting wealth. 40 percent of Millennials and Gen Z investors already use thematic investments, in contrast to just 9 percent of Boomers (Exhibit 1).
EXHIBIT 1
Share of Each Generation Using Thematic Investments
Source: Charles Schwab Modern Wealth Survey 2024
This trend is reflected in the growth of thematic investing assets under management (AUM). In the past five years alone, AUM in thematic strategies have doubled from $269bn to $562bn.3 While much of these assets are in passive and narrow-focused thematic strategies, the launch of active ETFs focused on multiple thematic opportunities is expected to tap into the growing demand from younger investors.
Implementation Is Everything
Although a thematic approach offers the potential to capture long-term returns, implementation is critical. A key challenge is identifying megatrends that offer genuine investment opportunities — while avoiding over-hyped or false narratives (Exhibit 2). Another challenge is market timing. According to research, thematic investors miss out on more than two-thirds of total returns due to poor timing.4 Because markets are a discounting mechanism, by the time a theme reaches the news or social media, it is typically too late to fully capture the opportunity.
EXHIBIT 2
Gartner Hype Cycle
Source: Gartner
To address these challenges, fund managers can deploy an active, fundamental approach to source new ideas directly from companies. This will help to identify and validate genuine long-term thematic opportunities and minimize false narratives. Investors can also look to a specialist thematic investment manager for theme identification, implementation, and timing. Finally, valuation discipline should be an integral part of any thematic manager’s toolkit to mitigate risks and maximize returns.
Key Themes for the Coming Decade
Several megatrends we identified in their early stages are starting to materialize, potentially reshaping the investment landscape going forward:
Emerging Megatrends with the Potential to Reshape the Investment Landscape
Smarter Industry and Reshoring
Around the world, governments are attempting to reshore supply chains, particularly for strategic industries like advanced semiconductors. Annual investment in new manufacturing facilities in the US hit a record $225 billion in 2024, while advanced semiconductor production in the US is expected to triple over the next decade. Reshoring and domestic prioritization trends are set to drive increased global capex in technology that reduces costs and improves productivity — presenting new opportunities for investors.
Applied Artificial Intelligence
In the past couple of years, the market has focused on direct AI beneficiaries linked to data center build out and model training. Now, there are opportunities to apply AI across industries, from technology to finance to retail where AI is already driving productivity gains and new product cycles. For example, the next major evolution in software appears to be underway with the development of ‘Agentic AI’ — the next generation of software companies will likely combine AI applications that assist humans with AI agents that can replace them.
Healthcare Innovation
Global health spending exceeded $10 trillion in 2024 and is expected to continue rising, driven by aging populations, obesity, and the growth of the middle class in the developing world. Investment opportunities are emerging at the intersection of healthcare and technology, including robotic surgery, data, and AI, as well as obesity drugs and outsourcing.
Anchoring to megatrends offers investors a differentiated lens to position themselves for attractive long-term returns — but only when these ideas are implemented carefully. For investors and financial advisors considering thematic investing, an established active thematic manager can help to navigate the complexities of an ever-evolving investment landscape.
1. Source: Cerulli - The Great Wealth Transfer: Capturing Money in Motion
2. Source: Cerulli Associates
3. Source: Morningstar - Navigating the Global Thematic Fund Landscape
4. Source: Morningstar - The Big Shortfall: Understanding the Gap in Thematic Funds
Important Information
Published on 9 July 2025
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