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Purpose Investments Inc. is launching a thematic fund on Cboe Canada with an interest in emerging fields including new technology and clean energy, offering investors early exposure to trending industries and sectors.
The Toronto-headquartered fintech and asset management company’s Purpose Tactical Thematic Fund (RTT-NE) allows investors to take a stake in mostly North American ETFs covering energy transition, electric vehicles, artificial intelligence and biotechnology.
The open-ended fund, which was listed on Cboe Canada (formerly NEO Exchange) on Oct. 13 as RTT, revolves around thematic investing – developing a narrowly focused portfolio specific to industries that are predicted to mature in the long-term.
“There’s a lot of thematic ETFs out there, but really what they’re trying to capture is a broad-based, gradual change in people’s behaviour or society or a certain industry,” Craig Basinger, a chief market strategist at Purpose Investments and manager of the fund, said in an interview with Sustainable Biz Canada.
“I think clearly one of the long-term secular trends is the world gradually moving to less carbon energy. We want potential exposure to that if our rules-based approach has us investing in it at that time.”
The transition to cleaner and greener sources of energy is a trend Purpose Investments hopes to help investors capitalize on.
Thematic climate investing
Purpose Investments holds over $17 billion in assets across its portfolios, with a focus on Canadian investors.
The firm took an interest in thematic investing because it believes the themes will experience significant growth over years or decades, but investors into higher-growth ETFs or strategies “show up usually very late to the party” and most of the gains are already achieved and held.
“If it’s going to enjoy outsized growth for the next five, 10, 15, 20 years, then that’s not a bad thing to have exposure to in a portfolio,” Basinger said.
More electric vehicles will hit the road in the future, which Basinger said is a long-term trend in society. But there will be fluctuations in the market as many players are not mature companies.
Its solution is a rules-based, “disciplined” investment process so early exposure is gained in themes such as energy transition, technology, and health and wellbeing.
In the energy transition theme, the Invesco WilderHill Clean Energy ETF and Global X Lithium & Battery Technology ETF were selected by Purpose Investments.
The investment process for the Purpose Tactical Thematic Fund starts by measuring momentum across thematic ETFs and choosing the ETFs with the highest momentum. If fewer than five momentum themes exist, the remainder is allocated evenly across the S&P 500 and to cash.
More importantly, Basinger said, investors can exit the ETFs if they are not performing up to expectations.
Jos Schmitt, the president and CEO of Cboe Canada, said in a press release: “More than ever before, we live in a world of unprecedented change in technology and market trends. The systematic and calculated strategy powering RTT allows investors to benefit from rising trends while providing a timely exit when momentum cools.”
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