These are exciting times for thematic exchange traded funds. Issuers are pushing boundaries and while data indicate investors are often slow to warm thematic ETFs, some of the newer additions to this camp have found rapid success.
In most cases, the objective of thematic ETFs is to provide investors with access to disruptive, fast-growing segments of the equity market. These funds offer new school spins on old school sectors, including consumer discretionary, financial services, health care and, of course, technology.
With new disruptive themes and ETFs representing those segments popping at dizzying paces, it can be difficult for investors to identify exactly which theme they want to access. The newly minted Global X Thematic Growth ETF GXTG can ease that burden.
Why It's Important
GXTG, which launched in late October and follows the Solactive Thematic Growth Index, uses a novel, but increasingly popular strategy seen in the world of ETFs: the fund of funds concept. Translation: the rookie ETF holds seven other Global X thematic ETFs.
Excluding GXTG, Global X offers 17 ETFs that it dubs “thematic growth” funds, so it's possible that GXTG's roster could eventually include more than seven ETFs.
GXTG currently allocates about 40.5% of its combined weight to the Global X Social Media ETF SOCL and the Global X FinTech ETF FINX. The Global X E-commerce ETF EBIZ and the Global X Internet of Things ETF IOT combined for over 27% of GXTG's weight.
“The Global X Thematic Growth ETF is designed to allocate across our thematic growth suite of ETFs, helping investors efficiently navigate which themes offer the most attractive growth opportunities and how to weight and diversify across those themes in a portfolio,” said the issuer in a recent note.
You can check out dozens of up-and-coming fintech companies at the fifth annual Benzinga Global Fintech Awards on Nov. 19 in New York City.
What's Next
GXTG is undoubtedly an effective way to access multiple themes under the umbrella of a single fund, a trait that could prove appealing to investors. Its fee for that access is fair at 0.50% per year, or $50 on a $10,000 stake.
Data indicate GXTG could eventually find success because there is momentum for thematic, particularly as disruption permeates new corners of the economy and financial markets.
“Investor interest in thematic investing has increased as well, with assets in US-listed thematic ETFs rising more than fourfold from approximately $5.7 billion in 2015 to $25.1 billion in Q3 2019,” according to Global X. “Yet as disruption finds its way into more corners of the economy and investors increasingly look to gain exposure to an expanding roster of themes, we recognized the need to create an all-in-one thematic solution.”
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