Investor appetite for thematic funds is waning as closures outpace launches

  • Thematic ETFs may be a thing of the past, with smaller ETFs at risk of closing
  • The surge in thematic funds in 2021 has been followed by more closures than launches
  • The ARK Innovation ETF has seen significant outflows this year
  • Actively managed thematic ETFs face challenges due to high costs and difficulty in selecting the right theme
  • The market is already saturated with tech stocks, reducing the appeal of thematic ETFs

Thematic exchange-traded funds (ETFs) may be losing their popularity, especially among smaller ETFs that are at risk of closure. According to Strategas, there is an oversupply of thematic ETFs in the market, with too many products chasing too few available dollars. The heyday of thematic ETFs may be seen as a relic of the era of quantitative easing (QE) and high beta growth companies. While there was a surge in thematic fund launches in 2021, the trend has reversed in the past two years, with more closures than launches. This shift can be attributed to changes in monetary policy, including elevated interest rates and quantitative tightening by the Federal Reserve. The actively managed ARK Innovation ETF, which focuses on disruptive innovation, has experienced significant outflows this year. The fund’s high expense ratio and the difficulty of selecting the right theme and timing for investment are some of the challenges faced by thematic ETFs. Additionally, the market is already saturated with technology stocks, reducing the appeal of thematic ETFs that heavily invest in this sector. Overall, the decline of thematic ETFs suggests a shift in investor preferences and a need for more innovative and differentiated investment options.·

Factuality Level: 2
Factuality Justification: The article is focused on the lack of investor appetite for thematic funds and provides relevant information about the performance of various ETFs. However, it contains unnecessary background information, repetitive details, and promotional content, such as email addresses and social media handles, which detract from the main topic.·
Noise Level: 3
Noise Justification: The article provides a detailed analysis of the challenges faced by thematic ETFs, including the reasons behind their lack of investor appetite, the impact of monetary policies, and the performance of specific ETFs. It offers insights into the supply and demand dynamics, the struggles of small funds, and the risks associated with thematic investing. The article also includes data and examples to support its claims, making it informative and relevant to investors interested in ETFs.·
Public Companies: Invesco QQQ Trust Series I (QQQ), SPDR S&P 500 ETF Trust (SPY), Nvidia (NVDA), Broadcom Inc. (AVGO), Facebook parent Meta Platforms Inc. (META), Amazon.com Inc. (AMZN), Advanced Micro Devices Inc. (AMD), Microsoft Corp. (MSFT), Google parent Alphabet Inc. (GOOGL), Adobe Inc. (ADBE), Salesforce.com Inc. (CRM)
Key People: Todd Sohn (ETF strategist at Strategas), Scott Davis (Head of ETFs at Capital Group)

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Financial Relevance: Yes
Financial Markets Impacted: Thematic exchange-traded funds, ARK Innovation ETF, Invesco QQQ Trust Series I, SPDR S&P 500 ETF Trust
Financial Rating Justification: The article discusses the lack of investor appetite for thematic funds and the potential closure of smaller ETFs. It also mentions the outflows from the ARK Innovation ETF and the performance of the Invesco QQQ Trust Series I and SPDR S&P 500 ETF Trust.·
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Extreme Rating Justification: There is no extreme event mentioned in the article. The article primarily discusses the lack of investor appetite for thematic exchange-traded funds (ETFs) and the challenges faced by smaller ETFs in particular.·

Reported publicly: www.marketwatch.com