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Thematic ETFs Have Soared in Nearly Two Years but Don’t Beat the Market, Says JPMorgan

Three wooden cubes stacked vertically on a brown background make up the word ETF. Cubes are scattered nearby and there is a clock. Front View Concepts

Thematic investing has increased in recent years, with investments in disruptive themes tripling in the last two years, according to a report by MarketsInsider on Wednesday.

The prosperity has benefited thematic investment managers such as Ark Invest, which was an early investor in Tesla and saw its assets under management soared since its start in 2014.

Meanwhile, the push to invest in thematic ETFs that focus on various trends, including robotics, space exploration, and renewable energy, does not benefit the end investor in the long term, subject to high fees and underperformance relative to the wider stock market.

In a note, JPMorgan analyzed a wider set of 1,000 thematic funds in the last 16 years and determined that they underperformed global equities by 1.6%.

This trend had played out in popular thematic managed ETFs by Ark Invest, which posted an increase in inflows as other trending stocks as Tesla surged. Cathie Wood’s fund was caught by the massive fund outflows afterward.

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