Thematic
funds
are
less
diversified,
more
volatile
and
overall
riskier
investments
than
your
average
open-end
equity
fund.
They
don’t
behave
as
an
asset
class,
and
their
fortunes
diverge
wildly
as
equity
investors’
favour
rises
and
fades
on
trending
topics.
In
the
past
twelve
months,
funds
investing
in
artificial
intelligence-adjacent
companies
have
outperformed,
but
investors
would
do
well
to
remember
the
heyday
of
the
autonomous
driving
and
clean
energy
themes,
both
of
which
underperformed
once
rising
interest
rates
pumped
the
brakes
on
many
young,
unprofitable
companies
in
thematic
funds’
portfolios.
One
constant
in
a
fund’s
attractiveness
is
its
fee
—
and
fees
are
one
of
four
pillars
on
which
Morningstar’s
Medalist
Rating
for
funds
is
based.
In
the
realm
of
thematic
funds,
which
include
both
open-ended
and
exchange-traded
funds,
the
latters’
much
lower
fees
put
them
at
a
distinct
advantage.
All
six
funds
in
our
list
offer
fees
in
the
lowest
quintile
of
thematic-fund
peers.
Should
I
Choose
an
Active
or
Passive
Thematic
Fund?
Along
with
each
fund’s
Morningstar
Medalist
rating
–
all
of
which
are
Gold
–
we’ve
included
their
star
rating,
a
backward-looking
metric
reflecting
each
fund’s
risk-adjusted
returns.
On
average,
despite
their
drastically
lower
fees,
exchange-traded
thematic
funds
available
for
sale
in
Europe
have
outperformed
their
actively
managed
counterparts
in
the
past
12
months.
While
the
average
total
return
for
open-ended
funds
tracking
themes
of
Social,
Technology,
Physical
World
and
Broad
Thematic
was
12.08%,
exchange-traded
peers
returned
12.96%.
Passive
thematics
do
harbour
a
drawback.
Morningstar
analyst
Kenneth
Lamont
highlights
passive
funds’
reliance
on
indexes
that
“by
their
nature,
are
more
rigid
and
less
adaptable
to
evolving
themes.”
This
rigidity
can
be
disruptive,
Lamont
says,
as
demonstrated
in
2021,
when
Blackrock’s
iShares
Clean
Energy
ETF
was
forced
to
switch
indexes
amid
the
wall
of
assets
flowing
into
the
theme
after
Joe
Biden’s
electoral
victory.
The
distinction
between
the
two
classes
is
about
to
become
more
complex.
With
Thursday’s
European
launch
of
the
ARK
Innovation
ETF,
actively
managed
thematic
ETFs
have
made
the
leap
across
the
Atlantic.
With
a
0.75%
management
fee,
it
sits
barely
above
Europe’s
index-based
competitors
but
still
well
below
actively-managed
open-end
funds.
The
Best
Rated
ETFs
–
And
What
Analysts
Say
L&G
Artificial
Intelligence
ETF
•
Medalist
Rating:
Gold
•
Morningstar
Rating:
★★★
•
Trailing
12-Month
Total
Return:
28.49%
•
Ongoing
charge:
0.49%
“The
strategy’s
management
team
earns
an
Above
Average
People
Pillar
rating.
The
strategy’s
effective
investment
approach
earns
an
Above
Average
Process
Pillar
rating.
High
liquidity
exposure
is
attributed
to
stocks
with
a
high
trading
volume,
lending
managers
more
flexibility.
And
a
low
quality
exposure
is
rooted
in
stocks
with
higher
financial
leverage
and
lower
profitability.
The
strategy’s
parent
organization
earns
the
firm
an
Above
Average
Parent
Pillar
rating.”
Rize
Cybersecurity
Data
Privacy
ETF
•
Medalist
Rating:
Gold
•
Morningstar
Rating:
★★★
•
Trailing
12-Month
Total
Return:
22.12%
•
Ongoing
charge
0.45%
“The
strategy’s
investment
process
inspires
confidence
and
earns
a
High
Process
Pillar
rating.
Independent
of
the
rating,
analysis
of
the
strategy’s
portfolio
shows
it
has
maintained
a
significant
overweight
position
in
liquidity
exposure
and
an
underweight
in
quality
exposure
compared
with
category
peers.
High
liquidity
exposure
is
attributed
to
stocks
with
a
high
trading
volume,
lending
managers
more
flexibility.
And
a
low
quality
exposure
is
rooted
in
stocks
with
higher
financial
leverage
and
lower
profitability.
The
team
managing
the
passive
product
drives
the
strategy’s
Above
Average
People
Pillar
rating.
The
strategy
belongs
to
a
strong
firm
that
earns
an
Above
Average
Parent
Pillar
rating.
The
firm,
for
example,
has
had
a
competitive
lineup
success
ratio
and
overall
attractive
fees.”
Lyxor
MSCI
Millennials
ESG
Filtered
(DR)
UCITS
ETF
Acc
•
Medalist
Rating:
Gold
•
Morningstar
Rating: ★★
•
Trailing
12-Month
Total
Return:
5.49%
•
Ongoing
charge
0.45%
“The
strategy’s
sensible
investment
philosophy
merits
an
Above
Average
Process
Pillar
rating.
Independent
of
the
rating,
analysis
of
the
strategy’s
portfolio
shows
it
has
maintained
a
significant
overweight
position
in
liquidity
exposure
and
volatility
exposure
compared
with
category
peers.
High
liquidity
exposure
is
attributed
to
stocks
with
a
high
trading
volume,
lending
managers
more
flexibility.
And
high
volatility
exposure
is
rooted
in
stocks
that
have
a
higher
standard
deviation
of
returns.
The
strategy’s
management
team
earns
an
Above
Average
People
Pillar
rating.
The
strategy’s
parent
organization
earns
the
firm
an
Average
Parent
Pillar
rating.”
iShares
Electric
Vehicles
and
Driving
Technology
UCITS
ETF
USD
(Acc)
•
Medalist
Rating:
Gold
•
Morningstar
Rating: ★★
•
Trailing
12-Month
Total
Return:
3.46%
•
Ongoing
charge
0.40%
“The
strategy’s
management
team
earns
an
Above
Average
People
Pillar
rating.
The
strategy’s
effective
investment
approach
earns
an
Above
Average
Process
Pillar
rating.
High
liquidity
exposure
is
attributed
to
stocks
with
a
high
trading
volume,
lending
managers
more
flexibility.
And
a
low
quality
exposure
is
rooted
in
stocks
with
higher
financial
leverage
and
lower
profitability.
The
strategy’s
parent
organization
earns
the
firm
an
Above
Average
Parent
Pillar
rating.”
Rize
Sustainable
Future
of
Food
UCITS
ETF
•
Medalist
Rating:Gold
•
Morningstar
Rating: ★
•
Trailing
12-Month
Total
Return:
-12.20%
•
Ongoing
charge
0.45%
“The
strategy’s
effective
investment
philosophy
supports
a
High
Process
Pillar
rating.
Independent
of
the
rating,
analysis
of
the
strategy’s
portfolio
shows
it
has
maintained
a
significant
overweight
position
in
liquidity
exposure
and
an
underweight
in
yield
exposure
compared
with
category
peers.
High
liquidity
exposure
is
attributed
to
stocks
with
a
high
trading
volume,
lending
managers
more
flexibility.
And
a
low
yield
exposure
is
rooted
in
holding
fewer
stocks
with
high
dividend
or
buyback
yields
—
instead,
typically
holding
stocks
in
an
early
stage
of
development.
The
team
managing
the
passive
product
drives
the
strategy’s
Above
Average
People
Pillar
rating.
The
strategy
has
a
solid
parent
that
earns
an
Above
Average
Parent
Pillar
rating.
This
firm
has
had
a
competitive
lineup
success
ratio
and
overall
affordable
fees.”
L&G
Clean
Energy
ETF
•
Medalist
Rating:
Gold
•
Morningstar
Rating: ★★★
•
Trailing
12-Month
Total
Return:
-22.90%
•
Ongoing
charge:
0.49%
“The
strategy’s
management
team
earns
an
Above
Average
People
Pillar
rating.
The
strategy’s
sensible
investment
philosophy
earns
an
Above
Average
Process
Pillar
rating.
Independent
of
the
rating,
analysis
of
the
strategy’s
portfolio
shows
it
has
maintained
an
underweight
position
in
quality
exposure
and
currently
has
an
underweight
in
volatility
exposure
compared
with
category
peers.
Low
quality
exposure
is
attributed
to
stocks
with
higher
financial
leverage
and
lower
profitability.
And
low
volatility
exposure
is
rooted
in
stocks
that
have
a
lower
standard
deviation
of
returns.
The
strategy’s
parent
organization
earns
the
firm
an
Above
Average
Parent
Pillar
rating.”
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