Global ETF data provider, Trackinsight, has launched a proprietary classification system for thematic ETFs as part of a dedicated research and analysis portal for investors who are using ETFs to gain exposure to new and evolving trends including demographic shifts, innovative technologies and emerging industries.
The firm writes that thematic ETFs go beyond conventional sector-based investing to target non-traditional industries and future-facing concepts such as cyber security, robotics, medical marijuana, space or video gaming. Story-driven and with immense retail appeal, thematic ETFs have been one of the highest-growing portions of the ETF industry. There are now 691 thematic ETFs from 124 different issuers listed worldwide managing more than USD297 billion in assets – a significant surge from the start of 2020, when there were just 372 thematic ETFs with USD90 billion in AUM.
Trackinsight’s survey with over 370 professional ETF investors revealed that 80 per cent already hold thematic ETFs in their portfolio and 40 per cent plan to increase their allocations this year. The proliferating number of thematic ETFs and wider institutional adoption have catalysed the need for robust and transparent investment tools, the firm says. The Thematic ETF Observatory was created to help investors understand how to use thematic ETFs in their asset allocation strategies, how to identify thematic ETFs with similar exposures and how to compare the different approaches used by ETF issuers to capture and track a specific theme.
Supported by ROBO Global and Legal & General Investment Management, the Thematic ETF investment portal is designed to enable investors to search, screen and compare thematic ETFs available in their region. Additionally, investors can learn about key trends and investment issues affecting thematic ETFs with independent research and analysis that leverages Trackinsight’s proprietary database of over 7,500 ETFs listed worldwide.
A key innovation from Trackinsight is the development of an open-source classification system – the Trackinsight Thematic Taxonomy (TTT), which provides a clear structure to the idiosyncratic and sometimes quirky range of thematic ETFs currently available to investors, the firm says. Thematic ETFs are categorised according to a unique three-tiered methodology which maps each ETF against five megatrends, 12 trends and 68 themes, providing a transparent framework for ETF research, comparison and analysis. The proprietary classification process aims at capturing dynamically the emergence of new trends and themes over time.
Anne-Valère Amo, Head of ETF Selection at Trackinsight says: “Thematic Investing has brought a new dimension to portfolio construction, complementing traditional geographical, sector and style allocations. As an implementation solution breaking these usual boundaries, thematic ETFs needed a new dedicated taxonomy due to the limitations of existing fund classification frameworks. Our proprietary taxonomy and Thematic Investing portal are therefore a response to investors’ need to be guided through the jungle of fast-growing thematic ETFs.”
Howie Li, Head of ETFs at LGIM, says: “We are delighted to be part of this initiative. Trackinsight’s unique datasets and classification system can genuinely help investors of all shapes and sizes when it comes to their ETF fund selection. We are dedicated to continue helping investors learn more about the benefits of thematic investing, especially with a focus on obtaining exposure to unique companies that are driving and enabling the structural and foundation changes taking place in our society. Thematic strategies built with an active approach to research and design can provide investors with growth through diversification rather than adding concentration risk to portfolios. This is a complimentary approach to asset allocation that we focus on at LGIM so that pure exposure to a theme is obtained largely through unique holdings that are not found in regional equity building blocks commonly used for portfolio construction. This new portal can guide investors in selecting themes as well as distinguish between different approaches in the implementation of thematic strategies.”
Richard Lightbound, CEO EMEA and Asia at ROBO Global says: “We’re thrilled to be supporting the launch of this much needed investor tool kit. As one of the pioneers and providers of disruptive technology indices, we understand the demand for transparent investment research and believe that the Thematic Observatory provides a clear path for investors navigating the world of thematic ETFs.”