It’s been a true transformation for the ETF industry over the last few years. Among many changes, the boom in thematic ETFs has been truly eye-catching. Beating the benchmark on a sustainable basis is tough in the present global backdrop that is fraught with issues.
And here is where thematic ETFs win. Thematic ETFs normally look to track companies that revolve around structural changes in the society and economy, the rapid advancement in technology and effective uses of natural resources.
Thematic investing is a long-term strategyto add flexibility to one’s portfolio in the emerging New Normal trend. As of the end of Q1 2021, thematic ETFs AUM accounted for 2.2% of the U.S. ETF industry’s $5.9 trillion total AUM. This is up from 1.9% AUM share at the end of Q4 of 2020, continuing the segments’ rapid growth when compared to the U.S. ETF industry as a whole, per a Global X report.
Positive net inflows led to $34.6 billion of Q1’s thematic ETF AUM gain, with market activity falling the total gain by $5.6 billion. On a year-over-year basis, Thematic ETF AUM shot up 430% from $25.1 billion at the end of Q1 2020. There are now 163 thematic ETFs, up from 150 at the end of last quarter, with 13 launches and no closures, per Global X. Notably, Global X remains extremely persistent in launching thematic ETFs.
Global X Classification
Global X’s thematic classification system contains four strata of classifications: 1) Categories; 2) Mega-Themes; 3) Themes; and 4) Sub-Themes with each segment is narrowing by every step.
Categories include sectors like – Disruptive Technology, People & Demographics, and Physical Environment.
Mega-Themes – Machine/Deep Learning, Cybersecurity, Quantum Computing, and Cloud/Edge Computing.
Themes represent the exact areas of transformational disruption. There are currently 39 themes in the classification system.
‘Sub-Themes’ are more niche areas.
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