Thematic ETF Inflows Plummet as Performance Sinks

Thematic exchange-traded fund inflows have plummeted so far this year as investor interest in specific investing niches wanes. 

Inflows dropped to $22.6 billion year to date, from $69.9 billion in the same period last year, according to a statement from U.K.-based ETFGI. Assets invested in thematic exchange-traded-funds and exchange traded products globally fell 14% this year to $241 billion from $279 billion last year, according to the research. 

ETFGI didn’t provide reasons for the declines, while noting the S&P 500 is down nearly 13% this year.  

Thematic ETFs, which offer investors opportunities to put money into hot ideas like renewable energy and cryptocurrencies, are seen as risky due to their narrow focus and are losing favor, according to the investment research firm Morningstar Inc. Investor risk appetite decreases in slumping markets, so seeing less money going into thematic ETFs is no surprise, Richard Gardner, chief executive officer at financial services firm Modulus Global, told Reuters earlier this month.  

In the first half of the year, $6.3 billion exited thematic ETFs compared with $142.9 billion coming in over the same period in 2021, according to Morningstar data.  

Thematics peaked in popularity in April 2021, when they pulled in $241 billion globally, Morningstar reported.