With all the broad market real estate already accounted for, ETF providers are honing in on specific segments and offering thematic strategies that focus on niche markets.
“It’s really an opportunity, number one, for other sources of outperformance. Everybody’s mining the same factors, styles – all that stuff. But thematics, slices, little slices of the equity markets or maybe an emerging trend or a technology – those are opportunities for outperformance that maybe aren’t captured by those factors, and also the opportunity for something that can diversify from the broader macroeconomic trends,” Simeon Hyman, Head of Investment Strategy at ProShares, said at Inside ETFs 2019.
For example, 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.
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) 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) takes on a long position in online retailers.
Additionally, as infrastructure investments have been receiving renewed attention, the theme is benefiting some ETFs, like the ProShares DJ Brookfield Global Infrastructure ETF (TOLZ ). 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.
Watch the full interview between ETF Trends CEO Tom Lydon and Simeon Hyman
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