Data confirm that thematic investing, particularly via ETFs, is starting to take off, but with so many compelling, disruptive themes to consider, some investors may have a hard time deciding between various ETFs.
The Global X Thematic Growth ETF (Nasdaq: GXTG), which debuted last October, solves that riddle by using other Global X funds to provide broad-based, thematic exposure. Currently, GXTG provides exposure to seven other Global ETFs, led by the Global X Social Media ETF (NasdaqGM: SOCL), Global X E-commerce ETF (NasdaqGM: EBIZ) and the Global X FinTech ETF (NasdaqGM: FINX).
The underlying index for GXTG first assigns each eligible Thematic ETF to a traditional sector. Next, at the annual reconstitution, the index applies a quantitative screen on the underlying securities comprising each eligible ETF to determine each ETF’s aggregate sales growth metric. This sales growth metric is used to determine the Thematic ETF with the highest aggregate realized sales growth within a given traditional sector, which ultimately determines the selection for inclusion in the index.
“As of the end of Q4 2019, thematic ETFs only represented 0.6% of the over $4.4 trillion in AUM in the US ETF industry,” said Global X in a recent note. “Yet, it’s proving to be a fast-growing space, with 121 thematic ETFs and $27.8 billion in AUM in the aggregate. Thematic ETFs saw $326.7 million in net inflows during the quarter and overall AUM for the space grew by $2.7 billion (11%), boosted by performance. Dominant growth over value and a strong showing in the tech and health care sectors contributed to these gains.”
Tagging A Lot Of Bases
Clearly, GXTG reaches a lot of corners of the thematic universe, but a key to the fund’s methodology (and advantages) is that Global X has a common sense approach to defining thematic investing.
“Global X defines thematic investing as the process of identifying powerful disruptive macro-level trends and the underlying investments that stand to benefit from the materialization of those trends,” according to the issuer. “By nature, thematic investing is a long term, growth-oriented strategy, that is typically unconstrained geographically or by traditional sector/industry classifications, has a low correlation to other growth strategies, and invests in relatable concepts.”
Other GXTG holdings include the Global X Lithium & Battery Tech ETF (NYSEArca: LIT) and the Global X Internet of Things Thematic ETF (NasdaqGM: SNSR).
For more thematic investing ideas, visit our Thematic Investing Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.