ETF Edge

Thematic investing is a growing trend in ETFs, researcher says, as sports betting fund launches

ETF researchers make the case for thematic investing as interest in niche funds grows
ETF researchers make the case for thematic investing as interest grows

Another new exchange-traded fund launch has experts pointing to a growing trend in the ETF market: the rise of thematic investing.

Since its start on June 4, investors have been making big "BETZ," so to speak, on the Roundhill Sports Betting & iGaming ETF. It's a fund whose holdings include North American names such as DraftKings, but that actually holds global companies that make the ETF a pure online sports betting play.

Nasdaq's chief economist, Phil Mackintosh, believes the ETF really captures investors' growing interest in more thematic funds than traditional broader-market and sector ETFs.

"When you find a thematic that the investor public wants to have exposure to, you get some money into it and that's one of the things we've seen with the smart beta ETFs over the past four to five years," he said Monday on CNBC's "ETF Edge." "They've been attracting a lot more assets relatively than all the boring index funds that were older and around for longer."

Roundhill Investments, creator of BETZ, was previously most well known for its esports ETF (NERD), another area that investors are looking to with the advent of a number of ETFs that have tried to capture the growth of the gaming industry and its adjacent markets.

VanEck's esports ETF (ESPO), for example, is another thematic ETF "capturing investor attention in a way that very few other things do," according to Dave Nadi, director of research at ETF Trends, in that same interview. And based on lockdowns that are still in place due to the coronavirus outbreak, Nadig said thematic ETFs like BETZ and esports ETFs really grab investor attention given how they cater to the current environment.

"Frankly, I could come up with some smart beta ETF based on a great quant model that might perform really well, and it's not as interesting as for an average investor," he said. "This makes a ton of sense to me just like the esports ETF as well. And I think in a lot of ways, thematics are the new factors."

BETZ did see a spike in the first few days of its launch. As of late, it's back to $15 as the broader market began turning lower this week.