Investors can utilize ETFs to track broad markets or focus on unique thematic concepts for targeted growth opportunities.
“What’s great about thematic ETFs: they go where people can really understand it. When you think about factor investing, smart beta, everybody wants to talk about the fundamentals that matter in your portfolio, but what’s often left out is that concept of growth,” Mike Akins, Senior Vice President and Director of ETFs for ALPS, said at the Inside ETFs 2018 conference.
“Great growth managers are going where the markets are going, and I think there’s a lot of opportunities now that we have the data and the technology to identify those trends, put them into a packaged vehicle – stock replacement vehicle, get diversification – all the good tax efficiencies, all that stuff – through a thematic process,” Akins added.
For example, ALPS Advisors recently launched the ALPS Disruptive Technologies ETF (Cboe: DTEC). DTEC tries to reflect the performance of the Indxx Disruptive Technologies Index, which identifies companies using disruptive technologies across ten thematic areas, including Healthcare Innovation, Internet of Things, Clean Energy and Smart Grid, Cloud Computing, Data and Analytics, FinTech, Robotics and Artificial Intelligence, Cybersecurity, 3D Printing, and Mobile Payment.
Related: A Growth ETF Opportunity Focusing on Global Disruptive Technologies
Companies using disruptive technologies are defined as those entering traditional markets with new digital forms of production and distribution, seek to disrupt an existing market and value network, displace established market-leading firms, products and alliances and increasingly gain market share.
The underlying index will only include companies that derive a minimum of 50% of revenue from a single disruptive technology thematic area and the index provider will review the themes every three years for inclusion.
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