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Investment trusts take the fight to thematic ETFs

A purer play emerges
Investment trusts take the fight to thematic ETFs
  • Investment trusts offer an alternative to ETFs in some 'thematic' areas
  • Risks and rewards could both be higher

Having agreed to pay £16.5m for a 63 per cent stake in thematic exchange traded fund (ETF) provider Rize, AssetCo (ASTO) has delivered the latest vote of confidence in a growing industry. Thematic ETFs are a promising area for any provider: the level of assets in such funds reached a new high of €32.4bn across Europe in the second quarter of this year according to Morningstar. The products available continue to broaden out: nine new thematic ETFs hit the European market in the second quarter of 2021, a figure not far off the record 17 launches for the whole of 2020.

And yet many thematic ETFs can be extremely blunt tools accused of several wrongs, from taking outsized stakes in small companies to not offering a pure enough play on a given theme. Investors tired of such portfolios may well take heart at the sight of some investment trusts turning to the thematic space – although the more targeted approach they appear to take could come with greater risk.

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