The demand for thematic funds has soared, according to new findings, with collective assets under management in the segment tripling in size during the last three years, despite less than half of funds established 10 years ago still surviving to 2020.
Morningstar’s Global Thematic Funds Landscape Report has shown at $296.2 billion ($US195 billion) in assets under management (AUM), themed funds now represent 1 per cent of total global equity fund assets, up from 0.1 of a percentage points 10 years ago.
A total of 154 new funds in the segment were seen to debut last year, compared to 169 the year before. As at December, there were 923 thematic funds.
However, despite their popularity, their odds are stacked against investors, the report noted, with only 45 per cent of all thematic funds launched prior to 2010 surviving to 2020. Of those that still exist, one in four outperformed the MSCI World Index during the 10-year span.
Europe is the largest thematic fund market, with its share of the global piece exploding from 2 per cent to 54 per cent in the last 20 years.
The market share of funds in North America decreased from 28 per cent to 16 per cent during the same period.
The report also found there is no dominant thematic asset manager globally. Pictet Asset Management is the world’s largest provider of thematic funds, but aside from a small footprint in Asia, it has no other presence outside of Europe.
The second largest provider, Nikko Asset Management, has a small presence outside of Japan, despite it teaming with ARK to launch technology funds in Europe and Australia in 2018.
BlackRock is the third largest provider, but the majority of its business is in Europe, with a portion in North America.
Robotics and automation thematic funds have emerged as the most popular category internationally, with more than $41 billion ($US27 billion) in assets. The technology-broad theme in Morningstar’s taxonomy accounts for the majority of global thematic fund assets, with $147.3 billion ($US97 billion) in AUM.
The second most popular category is resource management funds, largely populated by water-focused strategies, with $37.9 billion ($US25 billion) in AUM. Third place, with $35.1 billion ($US23.1 billion) goes to connectivity-themed funds.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].