Unique investment opportunities

Thematic ETFs have exploded in popularity in recent years

Grid of multiple themes

The advent of thematic ETFs represents one of the most significant trends currently taking place in the asset management sector. Thanks to them, investors have many more opportunities to diversify their portfolios and gain exposure to promising trends of the future. Therefore, they are an interesting way to go and invest in unusual, or otherwise difficult to access, areas of global markets.

For example, who has not heard of rare earths? It is a group of metals that are extremely critical for almost all the digital devices used on a daily basis and are at the heart of the ongoing competition between China and the United States. They are also relevant to the structural trends that have the potential to shape tomorrow’s societies, such as the ecological transition, digitisation and artificial intelligence. Their "rarity" does not derive so much from being scarcely present in the subsoil, but from the difficulty when it comes to their extraction and processing. In fact, they are often mixed with other elements, sometimes radioactive. Today, the rare earth business is predominantly in the hands of China, with only a few countries able to compete – thus, it is a near-monopoly situation. Only Canada, the US and Australia can minimally try to get close to the world's leading producer. How to get exposure to rare earth metals? For instance, through the ETFs that offer access to those companies involved in the extraction, processing and refining of rare earths. In fact, contrary to other metals, it is not possible to invest directly in rare earths, but instead it can be done through futures contracts. It has also been clear that the performance of such companies' shares is strongly correlated with the demand for these materials. Of course, there are risks such as investing in emerging markets associated with natural resources and in companies with small market capitalisation.

It would be possible to give numerous other examples that would strengthen the thesis on ETFs as a useful tool for accessing somewhat less known and distinct segments of global markets. It is worth mentioning those that are ideal for accessing specific segments of the healthcare sector. For example, there are that ETFs are available to invest in companies specialised in bionic engineering and genomics. Both of these two sectors are supported by various large-scale demographic trends, such as the growing and increasingly ageing global population and the demand for remote and personalised therapies. Bionic engineering is mainly involved in the design and production of advanced medical devices aimed at having a positive impact on the lives of many people. Examples include implants, chips of various kinds, heart valves, insulin pumps, and many more. In contrast, the field of genomics concerns gene therapies that focus on modifying cells to treat serious diseases.

It is important that investors familiarise themselves with risk factors and read relevant documentation carefully in order to make informed decisions.

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