Thematic Funds Are Back. But Our Investment Theme Remains: Be Wary of Investment Themes.

After a brief hiatus, thematic ETFs—Exchange Traded Funds, or baskets of stocks and companies focused on a narrow theme, trend, or concept—are being aggressively marketed by the investment management industry again. By creatively tapping into the investors’ deep desire for hyper-growth stories, the narratives of monstrous market sizes delve anywhere from artificial intelligence and robots to an insatiable demand for lithium in a world of battery-driven tools and cars to the “graying of America.” While the themes paint a breathless picture of growth, the research at Ballentine Partners paints a very different picture.