6 New Thematic ETFs With Potential

April 01, 2016

Thematic investing has been around for a long time. For better or worse, countless people pick and choose their investments based on their idea of the next hot trend in the markets.

Like the BRIC (Brazil-Russia-India-China) fad of several years ago, sometimes these themes work, sometimes they don't.

In any case, thematic investing isn't going away anytime soon. ETF issuers know this and they've launched a number of products in recent years that hone in on narrow niches of the market that may appeal to thematic investors.

Here are six of the more interesting launches we've seen.

PureFunds ISE Cyber Security ETF (HACK)

In today's increasingly digital age, most would agree that cybersecurity is extremely important. Almost on a monthly basis, there are reports of hackers stealing sensitive data from major corporations or even government agencies.

With so much attention on hacking and cybersecurity, an ETF tied to the space makes perfect sense. Launched in late 2014, the PureFunds ISE Cyber Security ETF (HACK | C-32) has been a resounding success from an asset-gathering perspective, taking in $1 billion in investor capital, according to FactSet.

HACK's success led First Trust to launch a competing fund in July of last year, the First Trust Nasdaq Cybersecurity ETF (CIBR | F-41), which took in about $100 million in eight months.

Yet as appealing as the cybersecurity theme sounds, HACK hasn't delivered from a performance standpoint. Since November 2014, the fund is down 4.7% compared with a gain of 7.3% for the broader iShares U.S. Technology ETF (IYW | A-99)―illustrating that thematic investing doesn't always work even when it seems like it should.

HACK currently has $735 million in assets under management and a 0.75% expense ratio.

U.S. Global Jets ETF (JETS)

Airlines stocks have been on a tear in recent years, buoyed by strong demand for traveling and plunging oil prices. Shares of Delta Air Lines, the largest U.S. airline, are up sevenfold from where they were five years ago.

For ETF investors, there was no way to get in on that action in a focused way until the launch of the U.S. Global Jets ETF (JETS), which came to market at the end of April last year. It's up 5.3% since then.

To some, an airlines ETF may sound too niche to be investable. But the fund may make sense from a few angles.

For one, JETS can act as a bet on lower oil prices. Jet fuel is one of the largest costs for airlines; thus, they've had a tendency to move up when oil drops (and vice versa).

Additionally, the airline business has a volatile history, with many major carriers filing for bankruptcy over the years, before later coming back and thriving. JETS may be a good way to play the boom/bust pattern in the broader industry.

JETS currently has $55 million in assets under management and a 0.60% expense ratio.

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