The backdrop for equities remains challenged for the year ahead as concerns about the impact of Fed policy on growth and corporate earnings run rampant. To Athanasios Psarofagis, a Bloomberg Intelligence ETF analyst, that suggests tougher times ahead in the thematic space.
“There’s likely going to be a purge,” he said by phone. “The market is going to be more difficult going forward, there’s just no way it will be able to support these.”
Issuers are unlikely to give up without a fight. Thematic ETFs charge a higher expense ratio by roughly 50 basis points compared to the average ETF, according to data by Bloomberg Intelligence — a compelling reason to keep them trading and even to launch more.
Still, Sylvia Jablonski, chief investment officer at Defiance ETFs, is bullish on the space. Investor conviction will be enough to support these funds, she said, most of which revolve around innovation, digitalization, artificial intelligence and advances in computing.
“As markets evolve and new themes become investable, investors are more comfortable with the diversification of innovation in a basket, versus banking on one name,” she said. “There have been so many advances in classic sectors like energy, tech, communication, pharma, alternative energy and that has opened the doors for issuers with great ideas.”
--With assistance from Sam Potter.
This article was provided by Bloomberg News.