How Thematic Funds Can Help Investors Participate in Megatrends

The world is evolving fast, with shifts like clean energy, digital lifestyles, and a growing focus on health and ageing. These sweeping changes, known as megatrends, are reshaping industries and economies.

For investors, megatrends can offer long-term growth opportunities. One way to tap into these opportunities is through thematic mutual funds that follow a megatrend investing approach.

Thematic mutual funds are equity funds that follow a certain theme or idea. By identifying those that centre on these megatrends, investors can find a relatively convenient way to potentially explore long-term growth opportunities without having to pick individual stocks and sectors.

Let’s look at how these funds work and what investors should keep in mind.

• Table of contents

• What are thematic funds?
• Why megatrends matter in thematic investing
• How thematic funds are different from regular funds
• Pros and cons of megatrend-based thematic funds
• Considerations before investing

What are thematic funds?

A thematic fund is a type of mutual fund that invests in companies connected by a common theme. These themes may relate to social, economic, technological, or environmental trends.

Examples of commonly explored themes include:

• Green energy and sustainability
• Business cycles
• Innovation
• International equities
• Healthcare and pharma
• Urbanisation and smart infrastructure

Why megatrends matter in thematic investing

Some thematic funds invest in ideas or sectors that are part of megatrends. Examples of such themes include

• Clean energy
• Digital transformation
• Healthcare innovation
• Artificial intelligence

Thematic funds focused on such trends offer a structured way to participate in these transformations through a professionally managed portfolio. This can be more convenient and less risky than having to independently identify such trends, pick companies that are participating in them, and modifying the portfolio as and when these trends evolve and based on company performance and strategy.

Also Read: What is megatrend investing?

How thematic funds are different from regular funds

Regular mutual funds, such as large-cap or sectoral funds, typically allocate funds based on market size or industry. Thematic funds differ by selecting companies across sectors that fit a unifying narrative.

For instance, a fund tracking a “smart mobility” theme might invest in:

• An electric vehicle manufacturer
• A battery tech company
• A software firm supporting autonomous driving
• A renewable energy supplier

Example for illustrative purposes only

Pros and cons of megatrend-based thematic funds

Pros:

• Exposure to long-term growth potential driven by structural trends
• Opportunity to invest in innovation and change
• Some funds offer global diversification

Cons:

• Higher thematic concentration can mean higher volatility
• Themes may evolve or take time to play out
• Entry timing can impact short- to medium-term performance

Considerations before investing

If you’re exploring thematic funds, especially those linked to megatrends, consider the following:

• Understand the theme: Choose a theme that you believe in and can follow.
• Start small: Allocate a portion of your portfolio, not the whole.
• Think long term: Megatrends take years to unfold. A holding period of 5–10 years or more is advisable.
• Review holdings: Ensure the fund’s portfolio aligns with the theme.
• Assess risk appetite: Thematic funds tend to carry higher risk than broad-based equity funds because of the concentrated exposure to a single theme or idea.

Also Read: What is Growth Investing?

Conclusion

Thematic funds may offer a convenient route for investors who want to engage with long-term global trends—particularly those shaped by megatrends like sustainability, digital transformation, and demographic change. While not every thematic fund follows a megatrend approach, identifying those that are structured around such ideas can offer exposure through a targeted and professionally managed route. For those looking to make their portfolios future-ready, thematic investing—when done thoughtfully and in moderation—can be a tactical addition to a broader portfolio.

At Bajaj Finserv Asset Management Ltd, we aim to harness the power of megatrends by offering investors access to themes shaping the world’s future — from clean energy to technology, innovation, demographic shifts and more. Many of our funds follow a megatrends investment approach to help you participate in these long-term shifts, with a focus on growth potential and diversification. Build your future-focussed portfolio with Bajaj Finserv AMC.