Bringing together man and machine

Thematic investing isn’t new – both active and passive managers have been doing it for years. While purely active or passive approaches come with benefits and drawbacks, we believe blending active oversight* with passive rules-based indexing combines the best of both worlds.

*MSCI may seek input from outside market experts on the ongoing evolution of the theme underlying the index, and relevant seed words. However, such input is advisory only in nature. Use of any such input is at MSCI’s discretion, and may or may not lead to a change to the index or index methodology.

Pros and cons of each approach

Purely active

Pros

Human quality control/sense check

Dynamic stock selection

Cons

Prone to human error/bias

Limited rigour

Higher management fees

Purely passive

Pros

Disciplined, rules-based approach

Can leverage big data

Cost-effective

Cons

Limited human quality control

Less dynamic portfolio

“Blended”

Pros

Benefits of active and passive combined
Inputs of index methodology evolve with time

But we don’t stop there…

Cons

Can still be prone to human error/bias

Adding a third pillar

Human oversight and expertise ensure your portfolio evolves with the theme. But there are thousands of companies in the world and it is virtually impossible to properly identify and analyse every single relevant stock using man power alone. In fact, we estimate that to thoroughly evaluate each and every one of the ~9,000 readily investible companies in the world, it would take about 180 years.* Even spread across a team of 100 dedicated analysts, it would still take close to two years!

That’s why in addition to seeking input from leading thematic experts**, we leverage big data and artificial intelligence to scan vast data sets in order to select the most relevant stocks. And by using low cost rules-based indexing, we aim to maximise your returns.

For illustrative purposes only. This is not a recommendation. *Calculation assumes one analyst researches the 9,072 companies of the MSCI ACWI Investable Market Index (IMI) index at a rate of 1 company per month, and assuming 8 hours per business day. **MSCI may seek input from outside market experts on the ongoing evolution of the theme underlying the index, and relevant seed words. However, such input is advisory only in nature. Use of any such input is at MSCI’s discretion, and may or may not lead to a change to the index or index methodology.