Thematic Slowdown Hasn't Stopped the Introduction of New ETFs

Stock market volatility has dampened demand for thematic funds across the board, but that hasn’t stopped new exchange traded funds (ETFs) from hitting the market, especially the thematic variety

A Financial Times article noted that the fall in thematic ETFs has been palpable for the year, confirming that all sectors have been hit by inflation fears. As such, doubts may be entering investors’ minds when it comes to allocating towards these funds.

“By supporting investment in areas such as healthcare, technology and clean energy, a growing number of exchange traded funds promote themselves as delivering rewards to both society and investors,” the article said. “But the chequered recent performance of many thematic funds has provoked a reappraisal of investor commitment to this expanding investment space.”

Nonetheless, many sectors still present growth opportunities that are now at a discount given the stock market weakness. If investors know where to look, they can get in on thematic trends to set themselves up for future growth.

Additionally, it hasn’t stopped providers from launching new funds. It provokes optimism that the markets will eventually take a turn for the better.

“However, in spite of this slowdown, thematic funds continue to take on money and product providers have continued to launch new versions, even in the wake of market volatility,” the article said.

Building Off the Clean Energy Theme

One of the themes during a rough 2022 for the markets has been the continued emphasis on environmental, social, and governance (ESG) initiatives. Reducing the world’s carbon footprint, in particular, has been getting increased attention, making ETF plays like the Global X CleanTech ETF (CTEC) stand out.

At a 0.50% expense ratio, CTEC seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Indxx Global CleanTech Index. The fund invests at least 80% of its total assets, plus borrowings for investments purposes, in the securities of the index and in ADRs and GDRs based on the securities in the index.

The index is designed to provide exposure to exchange listed companies that are positioned to benefit from the increased adoption of technologies focused on improving the efficiency of renewable energy production and/or mitigating the adverse environmental effects of resource consumption. Overall, the fund gives investors exposure to:

  • High growth potential: CTEC enables investors to access high growth potential through companies at the leading edge of a structural shift in global energy use.
  • An unconstrained approach: CTEC’s composition transcends classic sector, industry, and geographic classifications by tracking an emerging theme.
  • ETF efficiency: In a single trade, CTEC delivers access to dozens of companies with high exposure to the clean tech theme.

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