Thematic funds are kind of cool, fun and sexy. But have they delivered the goods from an investment perspective?

A recent report from Morningstar that looked at thematic funds pronounced a verdict that can be paraphrased thusly: “It's a mixed bag.”

Exchange-traded funds invested in areas such as cannabis, blockchain, cybersecurity and artificial intelligence/futuristic technologies have hit the market with a lot of buzz in recent years, though in some cases they eventually lost steam and faltered both in terms of performance and assets.

In its “Global Thematic Funds Landscape” report, Morningstar defined thematic funds as those ETFs and mutual funds with holdings based on their exposure to one or more investment themes ranging from macroeconomic or structural trends beyond the traditional business cycle.

Morningstar puts the thematic fund universe into four buckets:

• Technology — includes fintech, robotics, and automation and connectivity. Specifically, it runs the gamut from 5G and the internet of things to cloud computing and e-commerce.

• Physical world — this can include agriculture, resource management and alternative energy.

• Social — deals with structural changes in society that pertain to consumers, demographics, security, wellness or the political realm.

• Broad thematic — comprises funds that track multiple themes belonging to any of the above buckets.

Given that framework, Morningstar says the 923 thematic funds in its global database had total assets under management of $195 billion, a nearly threefold increase during the three-year period through year-end 2019. That was roughly 1% of total global equity-fund assets versus 0.1% 10 years ago.

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