The past 12 months saw 27 new ETFs being launched on the ASX and 19 ETFs closing down. As of March 2021, there were 220 ETFs on the ASX. One of the most noticeable trends was the large growth in thematic ETFs.
Thematic ETFs are ETFs constructed to invest in particular investment themes or sectors. In the past year, thematic ETFs have exploded, growing by over 400%, with ETFs in cloud computing, video gaming and clean energy coming to market.
Generally, recently launched ETFs follow themes that have performed well over the short term. The recent positive performance can trick investors into placing bets against future performance. However, like most themes, they tend to mean revert (i.e. return to their long term average), and that can lead to market timing which is extremely hard to get right.
Despite the risks of thematic ETFs, it’s likely that thematic ETFs will overtake sector ETFs (which focus on broader economic and industry classifications like healthcare, property and financials) over the next couple years.
While thematic ETFs only make up 4% of the total market currently, they will likely overtake the 7% of assets in sector ETFs as investors shift to ETFs with a concentrated target exposure, with better narratives, that aligns with their personal preference and assessment.
Thematic ETFs: things to be aware of
Despite their popularity, it costs more to construct a thematic ETFs, which in turn, leads to higher fees. The average thematic ETF charges 0.59% per year in fees, which is five times the cost of a broad based share ETF.
Shorter life spans
Thematic ETFs can get terminated if they don’t attract enough money. They’re high-risk/high-reward bets, so it’s up to the investor to limit their exposure to thematic ETFs and focus on less risky, lower cost and more diversified products that focus on all sectors and themes.
New ETFs: Active funds launched on ASX
Active fund managers have always been shy of ETFs, preferring to invest via traditional mutual funds or listed investment companies (LICs). However, we have seen these fund managers recently favouring the ETF structure given the liquidity and tax efficient characteristics. Eight active strategies were launched on the ASX over the past year, including fund managers such as Magellan, Hyperion, Loftus Peak and Munro.
New ETFs summary table by launch date (March 2020 – March 2021)
|Code||Fund Name||Sector||Fee||Launch Date|
|ICOR||iShares Core Corporate Bond ETF||Fixed Income & Cash||0.15%||May’20|
|IYLD||iShares Yield Plus ETF||Fixed Income & Cash||0.12%||May’20|
|GGOV||BetaShares Global Government Bond 20+ Year ETF – Currency Hedged||Fixed Income & Cash||0.22%||May’20|
|AASF||Airlie Australian Share Fund (Managed Fund)||Australian Shares (active)||0.78%||Jun’20|
|HQLT||BetaShares Global Quality Leaders ETF – Currency Hedged||Global Shares (strategies)||0.35%||Jun’20|
|MKAX||Montaka Global Extension Fund||Global Shares (active)||1.25%||Jun’20|
|HNDQ||BetaShares NASDAQ 100 ETF – Currency Hedged||Global Shares (sectors)||0.51%||Jul’20|
|HETH||BetaShares Global Sustainability Leaders ETF – Currency Hedged||Global Shares (strategies)||0.62%||Jul’20|
|LNAS||ETFS Ultra Long Nasdaq 100 Hedge Fund||Global Shares (strategies)||1.00%||Jul’20|
|SNAS||ETFS Ultra Short Nasdaq 100 Hedge Fund||Global Shares (strategies)||1.00%||Jul’20|
|E200||SPDR S&P/ASX 200 ESG Fund||Australian Shares (strategies)||0.13%||Aug’20|
|DVDY||VanEck Vectors Morningstar Australian Moat Income ETF||Global Shares (strategies)||0.35%||Sep’20|
|ESPO||VanEck Vectors Video Gaming and Esports ETF||Global Shares (strategies)||0.55%||Sep’20|
|HLTH||VanEck Vectors Global Healthcare Leaders ETF||Global Shares (sectors)||0.45%||Sep’20|
|GOAT||VanEck Vectors Morningstar World Ex Australia Wide Moat ETF||Global Shares (strategies)||0.55%||Sep’20|
|IIGF||Intelligent Investor Australian Equity Growth Fund (Managed Fund)||Australian Shares (active)||0.97%||Oct’20|
|VETH||Vanguard Ethically Conscious Australian Shares ETF||Australian Shares (strategies)||0.16%||Oct’20|
|MGOC||Magellan Global Fund – Open Class Units (Managed Fund)||Global Shares (active)||1.35%||Nov’20|
|LPGD||Loftus Peak Global Disruption Fund (Managed Fund)||Global Shares (active)||1.20%||Nov’20|
|MAET||Munro Global Growth Fund (Hedge Fund)||Global Shares (active)||1.35%||Nov’20|
|CLDD||BetaShares Cloud Computing ETF||Global Shares (sectors)||0.67%||Feb’21|
|ADEF||Apostle Dundas Global Equity Fund – Class D Units (Managed Fund)||Global Shares (active)||0.90%||Feb’21|
|CLNE||VanEck Vectors Global Clean Energy ETF||Global Shares (sectors)||0.65%||Mar’21|
|ERTH||BetaShares Climate Change Innovation ETF||Global Shares (sectors)||0.65%||Mar’21|
|HYGG||Hyperion Global Growth Companies Fund (Managed Fund)||Global Shares (active)||0.70%||Mar’21|
|QSML||VanEck Vectors MSCI International Small Companies Quality ETF||Global Shares (strategies)||0.59%||Mar’21|
|VLUE||VanEck Vectors MSCI International Value ETF||Global Shares (strategies)||0.40%||Mar’21|