Thematic ETFs Lead Flurry of Filings

August 29, 2022

Cannabis, health care and environmental infrastructure are among the focuses for future ETFs, indicating continued appetite for specialized, thematic investments, according to proposals filed with the Securities and Exchange Commission this month. BlackRock Inc., Harbor Capital Advisors Inc., ProShares and Direxion are among financial firms that proposed new funds this month in areas ranging from sustainable farming to battery metals. 

Tidal ETF Trust filed to offer the Subversive Cannabis ETF (LGLZ), which will be actively managed and focus specifically on the U.S. marijuana industry.  

Only two other funds, both actively managed, concentrate on that particular subset of the global cannabis market, including the largest fund in the industry, the $682 million AdvisorShares Pure US Cannabis ETF (MSOS). The Subversive fund can invest in foreign companies that have U.S. operations, and implement derivatives like swap agreements to gain exposure to the industry. 

BlackRock filed for the iShares Environmental Infrastructure and Industrials ETF, which tracks the FTSE Green Revenues Select Infrastructure and Industrials Index, focusing on companies that provide infrastructure and industrial solutions that support efforts to reduce environmental harm.  

The categories covered include energy efficiency and emissions mitigation, pollution reduction, and land and resource optimization. The fund’s underlying index also applies traditional ESG screens related to involvement in tobacco, weapons, coal mining, oil sands and business controversies.  

The Harbor Health Care ETF (MEDI) takes an active approach to a traditional sector, with a focus on companies with better-than-average management, insider ownership, competitive advantages and internal checks and balances around finances. Up to 35% of the portfolio can be invested in non-U.S. stocks. It will be subadvised by Westfield Capital Management.  

ProShares has filed for an ETF that will invest in global companies involved in mining materials needed to produce batteries, including lithium, nickel and cobalt. The ProShares S&P Global Core Battery Metals ETF tracks an index that as of July 20, 2022, drew its components from 17 countries.  

Direxion is planning to launch the Direxion Future of Farming ETF. The fund will track the S&P Kensho Sustainable Staples Index, which includes the components of the S&P Kensho Sustainable Farming Index as well as components from indexes targeting drones, robotics, 3D printing and genetic engineering that support sustainable farming.   

Other Interesting Filings 

Yet another filing leverages the reputation of YouTuber Kevin Paffrath, who focuses on investment topics like real estate and cryptocurrency in his online videos and is known as “MeetKevin” on the platform. The three actively managed funds are as follows: Meet Kevin All In ETF, Meet Kevin Select ETF and Meet Kevin Moderate ETF.  

The “All In” fund focuses on companies that it says have “disruptive approaches.” The “Select” and “Moderate” ETFs will hold a combination of these kinds of companies and broad-based ETFs to achieve their goals, with the Select fund holding between 20% and 40% in such ETFs and the Moderate fund allocating between 40% and 70%. All three funds can allocate up to 30% of their portfolio to ETFs intended to provide a macroeconomic hedge against market risk. The funds will be launched through white-label issuer Tidal ETFs.  

Federated Hermes launched its first ETFs late last year, marking the entry of yet another major active manager into the ETF industry from the mutual fund industry. While its first two ETFs were ultra-short bond ETFs, the Federated Hermes U.S. Strategic Dividend ETF will focus on U.S. equities paying high dividends selected based on fundamental criteria. 

And DWS has filed for an ETF that tracks an index applying S&P’s “Dividend Aristocrats” strategy to the ESG industry. The Xtrackers S&P ESG Dividend Aristocrats ETF tracks a subset of the S&P Composite 1500. The fund only includes companies that have consistently raised their dividends every year for 20 consecutive years. Its index also applies traditional ESG screens related to involvement in tobacco, weapons, coal mining, oil sands and business controversies.  

 

Contact Heather Bell at [email protected] 

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