2. Diversification

Most thematic ETFs have extremely high active share when compare to traditional beta indexes. Many securities that have significant weights in thematic ETFs are completely left out of traditional beta. We provide investors access to our Smart Cost Calculator in the ETF Think Tank to help them quantify the cost of that active share.

3. Trading Access

Many thematic ETFs succeed because they bring liquidity and options to themes that are often difficult to trade. These trading challenges usually come from top heavy themes like Invesco Solar ETF (TAN), Invesco Water Resources ETF (PHO), or Global X Social Media ETF (SOCL). Also, these themes may be dominated by international or emerging market companies that require trading in the local currency.

The Ultimate Meta Theme

We have often described the self-referenced or meta nature of TETF.index.  This index allows investors to track the growth of publicly traded companies within the ecosystem of the ETF industry. As a theme, the meta nature becomes even more prevalent, since this index tracks the movement toward ETFs, which is currently experiencing growth from a move toward thematic investing.

This article was written by the team at Toroso Asset Management, a participant in the ETF Strategist Channel.

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