The stellar growth comes despite research suggesting U.S.-listed thematic ETFs often launch at or near the top of the market for their theme
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As a result, they have underperformed the wider stock market on average on a risk-adjusted basis by about 4 percentage points a year for the first five years of their existence, according to a recent paper. Ben Johnson, director of global ETF research at Morningstar, says “the issues plaguing thematic funds are by no means unique to them,” with survivorship and outperformance rates tending to be low for all types of active strategies.
After a brief and messy flirtation with internet-focused funds in the 1990s, the thematic concept took off in the 2000s with the widespread adoption of ETFs, which boomed from just one in 2005 to 50 in 2010.