Thematic funds a challenge for retail investors
Their survivorship rate is low and many underperform, a study has found.
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MORNINGSTAR has sounded a warning on thematic funds, calling them out for poor performance, high fees and a poor survivorship record.
Thematic funds, which typically invest in stocks linked to popular themes such as climate change, robotics or artificial intelligence, are a staple in most fund markets as they are relatively easy to sell compared to staid and sensible diversified equity funds.
In research published last month, Morningstar finds a surge in global interest in thematic funds whose assets have grown nearly threefold from US$75 billion to US$195 billion over three years to end-December 2019. Assets in Asia have soared as well. Thematic fund assets in China, for instance, have risen from nothing to US$14 billion, making it the second largest thematic fund market in Asia after Japan.
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