BlackRock has become the latest firm to launch a blockchain-themed ETF, as interest in Crypto has prompted a wave of new assets for investors to explore. Discussing this and more further on this week’s ETF Report is ETF Trends’ head of research, Todd Rosenbluth, who has plenty to say about BlackRock’s interest in blockchain tech, as well as what else to consider when it comes to thematic ETF investing.
With this emergence of these thematic ETFs, as far as what types of inflows are seen, as Rosenbluth explains, these products tend to take time for investors to understand how things evolved. With that said, advisors are building their portfolios, often using a lower-cost core and then using thematic ETFs to round it out by adding potential reward opportunities.
“They’re looking into various themes. Blockchain is one of those themes. We’re seeing cybersecurity, electric vehicles, and lots of different choices from investors and advisors to build their portfolios with,” Rosenbluth adds."
As far as the type of attraction to blockchain versus other thematic ETFs seen in the past, Rosenbluth explains how coinbase is a large holding in this BlackRock ETF, but it’s also diversified. There are the benefits of other tech companies, but this is a long-term investment theme. As those have struggled a bit lately, this is an excellent opportunity for iShares to launch and investors to get in on the lower end as longer-term potential upside emerges.
“You’ve got to be looking long term with these thematic-oriented ETFs,” Rosenbluth notes. “They require a longer time horizon and some patience. We’re seeing advisors that are building portfolios using two or three of these themes in small doses to round out the portfolio — adding a little bit of sizzle with their core part of their portfolio.”
Time-wise, for these longer-term payoffs, Rosenbluth suggests that investors will need to have patience with individual themes, or they will need to look longer-term and be able to combine a couple of ETFs. For example, he points out the iShares Elf-Driving EV and Tech ETF (IDRV ) and the Autonomous & Electric Vehicles ETF (DRIV ), electric vehicle funds that have a 2024 and beyond for the time horizon, which will have more upside potential given that amount of time.
When it comes to the type of cadence on the rebalancing front, particularly concerning thematic ETFs, Rosenbluth explains how companies tend to be relatively quick during initial public offerings. Their goal is to get exposure to these various themes and do so when some of these new and emerging companies come to the marketplace.
Noting the type of response to cybersecurity that’s recently come as far as inflows are concerned, Rosenbluth explains how that particular theme was one of the originals. ETFs such as the ETFMG Prime Cyber Security ETF (HACK ), the iShares Cybersecurity and Tech ETF (IHAK ), and the Cybersecurity ETF (BUG ) all play to this area. With that in mind, there’s new interest in some of these products because of what’s been going on in the world, though it’s not been a straight line, as technology-oriented companies haven’t quite been in the same favor due to volatility.
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