Tapping into Developing Trends with Thematic ETFs

“Thematic or trend investing, as some people are terming it, is really a fascinating area in the ETF world for new product development,” Kieran Kirwan, Director, Investment Strategy at Proshares, said at the Morningstar Investment Conference. “It’s not a new concept, but certainly being able to access some of these long-term, socio-economic growth trends or growth factors, if you will, through a liquid, transparent, tradable ETF is a very useful tool and, really, it’s that idea about simple, intelligent and thoughtful strategies that may not be available to advisors in traditional sector or geography-based or country-based ETFs.”

For example, as infrastructure investments have been receiving renewed attention, the theme is benefiting some ETFs, like the ProShares DJ Brookfield Global Infrastructure ETF (TOLZ A). TOLZ focuses on companies whose assets include airports, toll roads, ports, communications, electricity distribution, oil and gas storage and transport, and water in both developed and emerging markets. To be included in the index, companies must derive more than 70% of their cash flows from infrastructure assets. The index excludes companies that supply services such as construction and engineering to the infrastructure industry.

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With the increased popularity of e-commerce and the decline of traditional brick-and-mortar shops, investors can also capture this growing trend through an ETF. The ProShares Decline of the Retail Store ETF (EMTY ) and ProShares Long Online/Short Stores ETF (CLIX B+) both take a short position in brick-and-mortar retail stores to capitalize on weakness in traditional stores. Meanwhile, the ProShares Online Retail ETF (ONLN B) takes on a long position in online retailers.

Additionally, ETF investors can look to targeted ETF strategies such as the ProShares Pet Care ETF (PAWZ) to capture the growth in the pet care industry. PAWZ is the first ETF of its kind to cater to the pet care industry. The ETF idea tries to capitalize on the pet care industry that is poised for even further growth as data collated from Grand View Research and other pet industry trends show that sales could reach upwards of $203 billion by the year 2025–a growth of 54% in less than 10 years.

For more ETF-related commentary from Tom Lydon and other industry experts, visit our video category on ETF Trends.