Thematic ETFs fell down to earth — is it time to look again? | opinion
But if research has pointed to their failings, we do appreciate that such products can fill gaps in portfolios and are increasingly important to certain investors. We also note that some themes may have the longevity to reward investors in the longer term, even if the ups and downs can be severe. So while not many thematics have made our latest list, we have followed the convention by outlining the options currently exciting our expert panel.
is down by nearly 30 per cent over a six-month period and is a good example of the sell-off tearing through the thematics space. But while it is unsurprisingly exposed to the problems being suffered by growth investors and US tech, the fund continues to target a noteworthy theme. It’s reasonably priced for a thematic product at 0.4 per cent, has billions in assets and is diversified across around 160 holdings, none of which made up more than 1.3 per cent of assets in late June.
As with other sectors, funds like these can have overlap with more mainstream global and US funds, as well as technology funds. It’s also worth conducting substantial due diligence, keeping an eye out for any changes to the underlying index methodology, and comparing the fund with its rivals. One of our panellists continues to prefer an L&G rival to this fund, in part because of the regular due diligence the provider itself carries out on the holdings in its thematic ETFs.
Investment themes like these can be open to interpretation, meaning funds may differ from a buyer’s expectations in terms of what they hold. This might be a case in point: the fund, which recently had nearly 400 holdings, did have a substantial healthcare allocation as some might expect, accounting for about half of its assets. But other sector allocations might surprise, particularly the fund’s 36.4 per cent weighting to financials.
To turn to the fund’s remit, it looks to hold companies that “specifically provide products or services to the world’s ageing population”, and this ranges from pharmaceuticals companies to insurers and consumer discretionary businesses. It’s a relatively broad interpretation of the theme, but that does dilute any sector-specific risk. This is another large fund and comes with a 0.4 per cent price tag.
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