Thematic funds in the US have seen a 50% growth in assets over three years, reaching a market share of 23%. Active ETFs have played a significant role in this increase, but concerns arise due to higher fees and inconsistent performance among managers.
The rise of thematic funds in the US is driven by the appeal of exciting ventures like space exploration. However, many of these new ETFs come with higher fees that can impact their performance. Managers have varying ideas of what belongs in thematic funds, leading to mixed results.
While thematic funds can be captivating, they are not without risks. Past examples like the failed Steadman Oceanographic Fund highlight the volatility of thematic investments. Investors are advised to focus on long-term themes rather than trying to time the market or pick winners in specific sectors.
There are currently 332 US thematic funds, with net flows of $19 billion in the first three quarters of 2025. The top issuers in this space include First Trust, Global X, BlackRock, ARK, and Kraneshares. Despite the popularity of thematic funds, they often underperform the S&P 500 over time due to concentration and volatility.
Thematic funds offer a safer alternative to picking individual stocks, but they still present risks. Investors are advised to stick with a theme for the long term and avoid trying to time the market. History is full of themes that didn’t pan out as expected, emphasizing the importance of a cautious approach to thematic investing.

Read more at Yahoo Finance: Rising Tide of Thematic ETFs Could Put Investors Underwater