Investors can turn to thematic exchange traded fund strategies to focus on rising trends in today’s market environment.
Jay Jacobs, U.S. head of thematics and active equity ETFs at BlackRock Inc., pointed out that many investors are using thematic ETFs to hedge against inflation and capture rising trends like the rebound in value stocks this year, Bloomberg reports.
“Now it’s really pivoted, especially as we’ve seen broader shifts within the market from growth to value. People are looking for more themes that are in the value space, especially themes that we think are going to be more resilient in this high inflationary environment,” Jacobs told Bloomberg.
ETF investors can target the value style with strategies like the iShares S&P 500 Value ETF (IVE), iShares Russell 2000 Value ETF (NYSEArca: IWN), iShares MSCI USA Value Factor ETF (VLUE), and iShares Focused Value Factor ETF (FOVL).
Beyond these broader strokes, Jacobs also highlighted several targeted thematic plays that have popped up recently.
“So we’ve seen a lot of interest in infrastructure as a theme. We’ve seen an incredible amount of interest in food-related themes, especially as we’ve seen inflation at the supermarket,” Jacobs added. “And then also we’ve seen interest in clean energy as a play on inflation, as well as some of the most recent news out of Washington.”
As a way to gain exposure to the infrastructure sector, investors can look to something like the e iShares U.S. Infrastructure ETF (Cboe: IFRA).
“A lot of infrastructure asset owners – companies that run airports, run toll roads, run seaports, or utilities companies – they literally get to change their tolls based off of CPI. So that is a natural built-in business hedge for inflation. When inflation is higher, they get to raise their rates, especially if their regulated rates are tied to CPI. And that just neutralizes those businesses from an inflation perspective,” Jacobs explained.
The iShares Emergent Food and AgTech Multisector ETF (IVEG) can help investors focus on companies expected to benefit from creating or using agricultural technologies or innovative food products or services.
“We’ve seen a rising emerging-market consumer, which is spending more money on food and more complex foods like proteins and dairies. We’ve seen a growing global population, which will reach 10 billion people by the year 2050. And we’re seeing a change in food preferences where people are increasingly demanding sustainable food,” Jacobs said.
Lastly, the iShares Global Clean Energy ETF (ICLN) offers exposure to the global clean energy sector.
“And then the third theme is clean energy where we’ve seen that a lot of the cost in clean energy is really in the initial build out. You build out a solar farm, you build out a wind turbine. That cost is mostly up front,” Jacobs added.
“So in an inflationary environment where you have rising commodity prices, upfront payment of a lot of those costs tends to be beneficiary.”
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