With the return to favour of top-down equities management and renewed focus by pension funds on their asset allocation and beta exposures, there has consequently been a resurgence in thematic investment styles and products.
Most managers, of course, include themes in their investment stories, whether or not they call their strategies thematic. The big ones of recent years, putting aside the financial crisis, have been globalisation, emerging markets and environmental issues.
Often times these themes overlap.
As part of the globalisation theme, for instance, trading companies are a big beneficiary, but there are also many others which may not be at first apparent. Globalisation leads to cultural transfers and, to generalise terribly, to western liberal views spreading throughout the world. Sexual liberation is also a part of this.
Pushing the envelope somewhat further than most managers would contemplate, a corporate and investment advisory firm with offices in London and Hong Kong is planning to launch an investment vehicle to tap into what is known as the LGBT market – lesbian, gay, bisexual and transgender.
This is not as silly as it at first seems. The funds, probably two private equity funds to be launched in the New Year, will aim to ride the trend towards greater tolerance and openness in both western and, increasingly, eastern societies toward sexual freedoms.
At least one of the funds is likely to have a bias towards Greater China, which is obviously a massive market but one where the cultural divide between east and west is still very large. Homosexuality was outlawed in mainland China until the late 1990s.
Paul Thompson, one of the founders of the advisory business Galileo Capital Management, says that whether you believe the potential LGBT market is five or 10 per cent of the population in whatever country, it is still very big and surprisingly homogenous in certain fields.
A big new industry could well emerge, for instance, in the internet social networking space, especially in countries where gays are more frowned upon than others. Then there are the more obvious areas of tourism, such as gay-friendly resorts, and retirement villages.
Galileo has formed LGBT Capital to house the funds, which Thompson says are likely to be supplemented next year by a listed equities fund focusing on sustainability, another big theme.
“We’re in the process of going to the market for seed funding,” the Hong Kong-based Thomson said recently. “It’s totally a PE sector because the businesses which cater for the LGBT market are very fragmented … We will be looking to assist with roll-ups to help the businesses build scale.”
Thompson believes this will be the first publicly available LGBT fund in the world and says there has been considerable interest not just from the gay market itself as individuals but also from professional investors.
