December 18, 2024
Who’s catching the thematic ETF wave in 2024? – InvestorDaily #NewsETFs

Who’s catching the thematic ETF wave in 2024? – InvestorDaily #NewsETFs

CashNews.co

Thematic exchange-traded funds (ETF) in Australia have witnessed some $600 million in flows in 2024, with over 40 products now available for local investors to choose from.

Global X investment strategist Marc Jocum noted that this year’s rebound has revealed clear winners and losers, with select technology sectors riding the 2024 megatrend wave.

“This year has really been all about technology in terms of thematics and mega trends, particularly around broad technology,” he told InvestorDaily.

“We’ve seen a lot of interest within semiconductors, as well as being one of the major benefactors from the AI revolution that we’re witnessing at the moment.”

AI tech providers, especially semiconductor companies, have emerged as early winners in 2024, capitalising on strong AI demand. According to Global X, the global semiconductor industry is projected to hit around US$1.2 trillion by 2030.

“There’s also been a lot of interest within cyber security, broader robotics and artificial intelligence as well,” Jocum said.

Robotics and artificial intelligence ETFs have seen their popularity more than double compared to 2023, according to previous Global X data. Meanwhile, local investors had already funnelled $30 million into cyber security ETFs by March this year, a stark contrast to the $270,000 in net flows recorded for all of 2023.

While some megatrends have already benefited from impressive inflows in 2024, Jocum noted that there are still sectors that have time to perk up.

“One area that may be quite interesting is US infrastructure,” he said.

“That’s an area that’s quite big in the US, given the pipeline of all the uplift that they have to do to some of the local infrastructure over there.

“That’s definitely an area that I see a potential uplift and some strong growth ahead, given the fiscal support we’ve seen from some of the US government as well.”

Global X, which launched a US Infrastructure Development ETF (PAVE) on the ASX in June, explained that recent legislative moves within the US are directing substantial funding towards infrastructure initiatives, signalling enormous growth potential for companies in this sector.

Moreover, the American Society of Civil Engineers, as recent as 2021, assigned US infrastructure a “poor grade”, further highlighting significant infrastructure investment opportunities across the pond.

Who are the sinkers?

However, not every megatrend within the booming tech sector has ridden the thematic wave. According to Jocum, sectors like cloud computing, virtual reality, and gaming stocks have experienced outflows so far this year.

“I think there are certain pockets that just haven’t been as popular, because those areas were quite popular a few years ago,” he said.

Moreover, food and agriculture funds have also seen modest outflows in 2024, particularly in the first quarter of the year. By the end of March, according to Global X, food and agriculture had shown more meaningful net outflows than any other sector.

Jocum also highlighted electric car and battery technology ETFs as an intriguing theme.

“Interestingly, whilst we have seen a little bit of outflows, investors are still quite sticky because they believe in the electric vehicle transition,” he said.

“That’s pretty much been the same in the US. We’ve seen a lot of money come out of lithium and battery type ETFs. But you know, that could be an area of opportunity, given it’s quite undervalued at the moment.”

While some unpopular megatrends have seen outflows in 2024, Jocum noted that Australia’s thematic ETF penetration remains impressive overall.

Thematic ETFs in the US account for just 1 per cent of the total ETF industry, but they make up a larger 3 per cent in Australia.

“In Australia, we’re in positive flows when it comes to thematic ETF … that says that the penetration might be a little bit stickier here in Australia, still more infant here,” Jocum said.