A thematic ETF’s investment thesis sounds compelling. It’s an obvious growth story. And its name is quite clever. Which means only one thing: be wary.
After a brief hiatus, thematic ETFs — Exchange Traded Funds, or baskets of stocks and companies focused on a narrow theme, trend, or concept — are being aggressively marketed by the investment management industry again. In 2024, 66 new thematic ETFs were launched in the U.S., capturing roughly $50 billion in investor flows, and the first half of 2025 has seen a similar pattern.(Source: Invesco and FT.com) Thematic ETFs tap into our deep desire for hyper-growth stories. Artificial intelligence and robots. Space, rockets, and satellites. Insatiable demand for lithium in a world of battery-driven tools and cars. The “Graying of America” has companies positioned to benefit from the inexorable aging of baby boomers. Their narratives are compelling, dotted with the promise of unbridled growth or monstrous market size. These thematic ETFs are creatively marketed with clever ticker symbols — memorable, catchy, and a signal that they were the first to identify this money-making mega trend: BOTZ. UFO. LIT. BATT. AGNG. There are literally hundreds of these ETFs that have collected hundreds of billions of dollars in assets and countless millions in fees.
Our advice: be wary. The themes paint a breathless picture of growth. Our research paints a very different picture.
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