3 Thematic ETFs Demanding Investor Attention In 2021

3 Thematic ETFs Demanding Investor Attention In 2021

Every year, the top asset-gathering exchange-traded funds are pure beta, broad market funds. Think the Vanguard Total Stock Market ETF (NYSEARCA: VTI), Invesco QQQ (Nasdaq: QQQ), or, in the fixed income department, the iShares Core U.S. Aggregate Bond ETF (NYSEARCA: AGG).

While that asset allocators' affinity for boring ETFs isn't likely to change, 2020 may go down as the year that it was hip to embrace thematic funds.

Combine the reputation for outperformance by these ETFs and younger investors' willingness to go thematic, and it's safe to say these funds are just getting going when it comes to adding new assets.

As of late in the third quarter, there was nearly $72 billion allocated to U.S.-listed thematic ETFs, more than quadruple the level seen six years earlier.

“In the last five years, thematic ETF assets under management (AUM) have grown 25% annually, well above the 17% rate for total equity assets,” notes WisdomTree.

Plenty of thematic ETFs will enter 2021 with the potential to shine. Here's a trio to consider.

WisdomTree Growth Leaders Fund (PLAT)

The premise behind the WisdomTree Growth Leaders Fund (NYSEARCA: PLAT) is simple. PLAT, which is higher by 59% year-to-date, is comprised of high octane companies with platform-based business models, such as Alphabet (Nasdaq: GOOG), Amazon (Nasdaq: AMZN), Microsoft (Nasdaq: MSFT), and PayPal (Nasdaq: PYPL).

Many PLAT companies can be seen as “modern monopolies” and nearly all of the ETF's components fit the bill as a disruptive purveyors of seismic change in their respective industries. Both traits are positives for long-term investors.

“Our expectation is for platforms to disrupt competitive landscapes, and to gain market share at the expense of traditional, linear businesses — while doing so with better economies of scale and potential for long-term profitability,” according to WisdomTree. “PLAT can replace or complement both active and passive growth-oriented investment strategies.”

Roundhill Sports Betting & iGaming ETF (BETZ)

One of the true success stories among this year's crop of new ETFs, the Roundhill Sports Betting & iGaming ETF (NYSEARCA: BETZ) is a prime example of a thematic ETF entering 2021 with an array of tailwinds.

BETZ debuted in early June and has already returned 62.39% while accumulating $200 million in assets under management.

Buoyed by Wall Street's seemingly undaunted enthusiasm for sports wagering equities, BETZ enters 2021 with multiple catalysts, namely increased legalization of iGaming and sports betting by cash-strapped states. Near-term sparks could arrive via New York signing off on mobile betting and Massachusetts signaling sports betting will be addressed and passed in the 2021 legislative session.

Adding to the case for BETZ in 2021 is that the new year will be the first full year of sports wagering in new “live and legal” states, such as Colorado, Illinois, Michigan, and Tennessee. 

The sports calendar should normalize in the back half of the year.

ARK Fintech Innovation ETF (ARKF)

The ARK Fintech Innovation ETF (NYSEARCA: ARKF) already more than doubled this year, meaning asking for a sequel in 2021 borders on the greedy, but that doesn't mean investors should gloss over ARKF.

It's a time when bitcoin is surging, cashless payments are taking more market share and digital wallets are deeply undervalued.

As companies such as Square (NYSE: SQ), ARKF's top holding, further monetize digital wallets, the future is bright for this actively managed ETF.

“We believe that Square’s (SQ) Cash App could become a leading global consumer financial services provider,” according to ARK research. “If Cash App can monetize 20% of its US user base at the level of traditional banks today, then with modest growth in its seller business, SQ could return 19% at an annual rate during the next five years, rising from $150 today to $375 per share in 2025.”

 

© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.