Gone are of the days of plain vanilla ETFs. The trend of launching thematic and niche ETFs is palpable. Issuers are tapping concepts that are emerging and have strength of stay longer in the investment world.
BlackRock has pointed out five megatrends that are here to stay. The trends include technological breakthrough, climate change & resource scarcity, rapid urbanisation and shifting economic power. Investors can very well cash in on these themes by investing in the related ETFs. Below we highlight a few ETFs from each category.
The fundamentals of the technology sector are pretty strong. Rising enterprise spending and emerging technologies like cloud computing, artificial intelligence and big data are acting as catalysts for the tech sector. Global spending on technologies and services to shift companies to the digital age are expected to reach $1.8 trillion by 2021, per data from International Data Corp (read: Tech Stocks Log Seven-Year Best Spell: ETF Winners).
BlackRock quotes mckinsey’s data, per which about “two-thirds of all occupations could see a third or more of their constituent activities automated.” No wonder, there will be a strong lineup for high-tech ETFs.
BlackRock itself has iShares Cybersecurity and Tech ETF IHAK, iShares Exponential Technologies ETF XT and iShares Robotics and Artificial Intelligence ETF IRBO in this field, but there are products from other issuers as well. These are ETFMG Prime Cyber Security ETF (HACK - Free Report) , Global X Robotics & Artificial Intelligence Thematic ETF BOTZ, ALPS Disruptive Technologies ETF (DTEC) and many more (read: Here's Why You Should Invest in Robotics ETFs).
Climate Change & Resource Scarcity
Global warming is one of the biggest challenges facing us. BlackRock highlighted a data provided by ipcc.ch that by 2100, the average surface temperature of the planet will rise 5.8 degree Celsius since the late 19th century. Investors should note that global warming is not limited to only rising sea levels, drought in one region and flood in other, the latest theory is that this monster can “cause job losses, recessions and even a tumbling stock market” according to economists.
So, a global effort will be put in to end the fossil fuel era. iShares MSCI ACWI Low Carbon Target ETF (CRBN - Free Report) and iShares Global Clean Energy ETF (ICLN - Free Report) are apt picks in this regard (read: Forget Trump Budget, 5 Green ETFs Crushing the Market).
Demographic & Social Change
BlackRock noted that “by 2050 a third of the population of 55 countries will be over 60 years old.” Lower fertility rates will result in slower population growth and aging population, per un.org. Advanced medical treatment and societal changes will also cause the world to have more aged population over time.
BlackRock has a product called iShares Ageing Population UCITS ETF (AGED) for the UK market, but investors here can tap the market with Janus Henderson’s theLong-Term Care ETF (OLD - Free Report) . Per the issuer of OLD, the size and scope of the U.S. long-term care market is extensive, projected to reach $550 billion by 2024. Investors can also tap the market with Global X Longevity Thematic ETF (LNGR - Free Report) , which bets on companies that somehow contribute to increase human life span.
“Two-thirds of the world’s population will live in urban areas by 2050. In 1950, only 30% lived in urban areas” per BlackRock. Vanguard Global ex-U.S. Real Estate Index Fund ETF Shares VNQI, iShares U.S. Real Estate ETF (IYR - Free Report) and iShares Residential Real Estate ETF (REZ - Free Report) should be prime beneficiaries.
Since urbanisation needs more industrial metals like copper, iPath Series B Bloomberg Copper Subindex Total Return ETN (JJC - Free Report) and Global X Copper Miners ETF (COPX - Free Report) should benefit from the trend.
Together, India, China and Nigeria will form 35% of the projected growth of the world’s urban population between 2018 and 2050. So, Global X MSCI China Real Estate ETF CHIR and Columbia India Infrastructure ETF should see some strength ahead (read: Why These Chinese Sector ETFs Are Crushing S&P 500 in 2019).
Shifting Economic Power
There could be gradual strengthening in some emerging economies. China is likely to take the title of the new global superpower by 2030 with India giving competition to the United States by 2050. So, iShares China Large-Cap ETF (FXI - Free Report) andiShares India 50 ETF (INDY - Free Report) are good bets in this regard.
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