Goldman still likes the 'thematic ETF' market — and named the ones attracting money now

Published Fri, Dec 3 20212:15 AM EST

Thematic exchange-traded funds — which let people invest in stocks related to a trend instead of an index — have had a difficult year, after some exceptional performance in 2020. Despite that, Goldman Sachs says they continue to prove popular and names the ones with the biggest inflows this year. Assets under management in thematic ETFs more than doubled in 2020, Goldman analysts, led by Jessica Graham, noted on Nov. 29. But some of the best known thematic ETFs have had a tough 2021, with Cathie Wood's flagship ARK Innovation Fund down around 20% year-to-date, for example. While Graham noted that growth in the segment has slowed this year, "the category remains one worth watching: flows have been stable despite a more volatile performance backdrop, liquidity has improved and product launch cadence remains," she said. The bank added that there were some signs thematic ETFs were a "maturing category." Goldman noted that mobility, infrastructure and natural resources were the standout themes when it comes to both growth and performance among thematic ETFs. With regards to more popular themes, the analysts noted that internet-focused ETFs had been a "bright spot," with significant inflows despite negative performance. Goldman also highlighted that thematic ETFs had seen a significant increase in trading volumes this year. "Overall trading volumes in thematic ETFs surged far more than any other ETF category since the beginning of 2020," the note said. Goldman listed the thematic ETFs that received the highest inflows since their peak in February, even as their respective broader sectors saw stagnation. The KraneShares CSI China Internet ETF , which trades under the ticker KWEB, came top of the list, with inflows of $7.8 billion since February. The inflows came amid a challenging period for the internet sector in China, as the Chinese Communist Party launched a months-long regulatory crackdown that hit its tech giants, including Alibaba , Tencent , Baidu , Didi , hard. The Global X US Infrastructure Development ETF was next on the list, with inflows of $3.5 billion since February. The ETF, which trades under the ticker PAVE, hit a 52-week high on Nov. 8, after the U.S. House of Representatives passed a $1 trillion bipartisan infrastructure bill. The ETF, whose top holding is steelmaker Nucor , is up 27% this year. Also on the list was t he Global X Lithium & Battery Tech ETF , which saw inflows of $1.6 billion since Feb. Lithium, a key ingredient in batteries for electric vehicles, has been in the spotlight amid a global shift away from fossil fuel dependency. Read more: Want in on the electric vehicle boom? This battery ETF has an average return of over 100% Lithium-ion batteries are also increasingly being utilized for residential and grid-scale storage. The fund, which has about $6 billion in assets, is up 48% this year. Its top holdings are U.S.-based global chemicals company and the world's largest lithium miner Albemarle , Chinese battery manufacturer Eve Energy and electric vehicle behemoth Tesla . The Global X Uranium ETF made the Goldman list too as it received inflows of $800 million since February. The uranium ETF has an average annualized return of 113.69% and is up 59% year-to-date. Here are the top 10 ETFs on Goldman's list of thematic ETFs that have seen inflows since February, even as overall growth stagnated in their categories: KWEB - KraneShares CSI China Internet ETF - $7.8 billion PAVE - Global X US Infrastructure Development ETF - $3.5 billion GUNR - FlexShares Global Upstream Natural Resources Index Fund - $2.0 billion LIT - Global X Lithium & Battery Tech ETF - $1.6 billion LCTU - Blackrock US Carbon Transition Readiness ETF - $1.4 billion CIBR - First Trust NASDAQ Cybersecurity ETF - $1.3 billion ICLN - iShares Global Clean Energy ETF - $1.2 billion INFL - Horizon Kinetics Inflation Beneficiaries ETF - $800 million URA - Global X Uranium ETF - $800 million BUG Global X Cybersecurity ETF Cybersecurity - $800 million