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ETF Areas to Join the Thematic Investing Trend in 2H20

Sweta Jaiswal, FRM
·4 mins read

The coronavirus pandemic continues to aggravate as the second wave of the outbreak has hit hard. Top infectious disease specialist, Dr. Anthony Fauci, has warned that the new coronavirus cases could increase up to 100,000 per day, if necessary actions are not taken to control the outbreak in some states in the United States (per a CNN report).

The severity of the outbreak is leading investors to opt for comparatively resilient investment options and strategies. In such a scenario, investors can consider some of the following thematic investing trends for the second half of 2020, which is expected to keep facing the brunt of the outbreak.

Let’s take a look at some of the themes that are currently trending in the investment world.

AI, Robotics & Cyber Security

We are living in an era largely dominated by AI applications and technological advancements. Revolutionary technologies like AI, ML and IoT are fast changing the business landscape by expanding opportunities, growing revenues and enhancing efficiencies. In fact, with almost 60% of thematic assets, technology is the most popular broad theme in North America, per a Morningstar report.

The robotics market is flooded with opportunities as robots are being used for jobs such as sanitizing hospitals, homes and workplaces along with monitoring, surveying, handling, and delivering food and medicines.

However, increasing adoption of these technologies is exposing businesses, governments and organizations to cyber risks. Given the severity of the situation, Cybersecurity Ventures expects the worldwide expenditure on cybersecurity to surpass $1 trillion cumulatively from 2017 through 2021. Per a Grand View Research report, the global cyber-security market is expected to reach a worth of $241.1 billion, at a CAGR of 11%, from 2019 to 2025. Accordingly, our investors can consider Global X Robotics & Artificial Intelligence ETF BOTZ, First Trust Nasdaq Artificial Intelligence and Robotics ETF ROBT, ROBO Global Robotics & Automation ETF ROBO, iShares Robotics and Artificial Intelligence Multisector ETF IRBO, First Trust NASDAQ CEA Cybersecurity ETF CIBR and ETFMG Prime Cyber Security ETF HACK (read: Try These ETF Areas in Virus-Impacted Second Half of 2020).

Sustainable Investing

ESG investing continues to gain investor attention despite the coronavirus pandemic. Going by Morningstar Direct’s data, investors spent at least $12.2 billion on ESG funds in the first four months of 2020, per The Wall Street Journal report.

The report also highlights the resilience of ESG funds’ performance, which mostly generated better-than-average returns in comparison to the broader S&P 500 index. Going by the report, more than 70% ESG funds across all the asset classes generated greater returns than their counterparts through the first four months of 2020. To gain exposure to ESG investments, investors can consider iShares ESG MSCI USA ETF ESGU, Xtrackers MSCI USA ESG Leaders Equity ETF USSG, Vanguard ESG U.S. Stock ETF ESGV and Nuveen ESG Large-Cap Growth ETF NULG (read: ESG ETFs to Gain as Goldman Sees Rising Popularity).

Alternative Energy Funds

Alternative energy includes any energy source that acts as a replacement to conventional and non-renewable fossil fuel. These energy sources are also called renewables as they are continuously replenished through natural processes. Going by an International Energy Agency (IEA) report, worldwide supplies of renewable electricity are expected to expand 50% over the next five years. Another IEA report reflects that U.S. annual renewable energy consumption surpassed coal consumption for the first time in 2019 since 1885.

Notably, the EIA, in its latest Short Term Energy Outlook, has projected renewable energy to be the fastest-growing source of electricity generation for the nation in 2020. 

Thus, investors can consider the following ETFs -- iShares Global Clean Energy ETF ICLN, Invesco Solar ETF TAN, First Trust NASDAQ Clean Edge Green Energy ETF QCLN and ALPS Clean Energy ETF ACES (read: Alternative Energy ETFs to Stay Strong Amid Coronavirus Crisis).        

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ETFMG Prime Cyber Security ETF (HACK): ETF Research Reports
 
Invesco Solar ETF (TAN): ETF Research Reports
 
First Trust NASDAQ Clean Edge Green Energy ETF (QCLN): ETF Research Reports
 
Global X Robotics Artificial Intelligence ETF (BOTZ): ETF Research Reports
 
ROBO Global Robotics and Automation Index ETF (ROBO): ETF Research Reports
 
iShares ESG MSCI USA ETF (ESGU): ETF Research Reports
 
First Trust NASDAQ Artificial Intelligence and Robotics ETF (ROBT): ETF Research Reports
 
ALPS Clean Energy ETF (ACES): ETF Research Reports
 
iShares Robotics and Artificial Intelligence Multisector ETF (IRBO): ETF Research Reports
 
Xtrackers MSCI USA ESG Leaders Equity ETF (USSG): ETF Research Reports
 
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