Thematic exchange traded funds often get bum raps and in some cases, those accusations are true. The ETF purists that would have market participants invest solely in pure beta broad market funds assert that thematic ETFs have high fees and come to market when mania surrounding a particular theme is at its apex, implying the fund is destined for the ETF graveyard because it won’t gain traction because the underlying theme is itself destined for the thematic cemetery.
Indeed, thematic ETFs do have higher fees than funds tracking the Russell 1000 or S&P 500 indexes and there examples of these products being too much of a good thing, slicing and dicing investment cases in increasingly fine ways.
On the other hand, it pays to remember that there was a time when aerospace and defense and biotechnology ETFs were considered thematic. These days, funds like those are considered “tactical” and not disparaged with the thematic label.
There are some points in favor of thematic ETFs. First, not all have succumbed to mania. Many were well-timed and address investment concepts that are still in their infancies. Second, a slew of thematic ETFs available to advisors and investors are courtesy of big, trusted issuers and these products aren’t particularly exotic. Their niche may be, but a lot of these funds simply follow cap-weighted indexes chock full of well-known stocks. Finally and perhaps of the most relevance to advisors, thematic ETFs are excellent ways to connect with younger prospects and clients.
Millennials, Gen Z Want to Be on the Cutting Edge
Advisors that are paying attention know that millennials and Gen Z are generations that were raised on technology and their tech proficiencies have carried over to their investing styles. A new Nasdaq survey confirms as much.
Sponsored by Invesco – massive issuer of traditional and thematic ETFS -- the survey titled “ETF Investors Navigate a Changing Economy: Generational, Economic and Social Trends Driving ETF Opportunities” indicates younger investors want more than their parents’ industry and sector funds.
“Gen Z and Millennial investors are showing strong interest in newer, future-focused investments. Nearly half of Gen Z (46%) and Millennials (50%) hold cryptocurrency-themed ETFs—significantly higher percentages than Gen X (38%) and Baby Boomers (12%),” according to Nasdaq.
Obviously, cryptocurrency ETFs that hold stocks or bonds are prime examples of thematic funds and younger investors’ crypto enthusiasm is well-documented, but that doesn’t mean advisors can rely solye on crypto to serve the thematic desires of millennial and Gen Z clients. The Nasdaq study reveals more than 40% of younger investors are interested in both artificial intelligence (AI) and fintech ETFs.
Speaking of fintech, I’ve been around ETFs so long that I remember a time when such funds were considered too nuanced to catch on with advisors. Yet, as just one example, the Global X FinTech ETF (FINX) is about two months shy of its ninth birthday and is cruising toward that occasion with nearly $310 million in assets under management and a 12-month gain of 37%.
Younger Clients Want High-Growth Access
Despite their affinity for tech, technological innovation isn’t the primary reason why younger investors like thematic ETFs, such as cryptocurrency and renewable energy funds. Rather, about seven in 10 Gen Zers and millennials want to tap into crypto ETFs for high growth potential and roughly 57% feel the same way about renewable energy funds.
Another point that should be acknowledged and it was noted in the Nasdaq survey is that younger investors take long-term views of ETFs addressing concepts such as crypto and green energy. That’s encouraging because another common critique of thematic ETFs is that they’re short-term trading vehicles that discourage long-term investing. Younger investors are dispelling that notion.
There’s more good news for advisors. ETF investors, including those with significant assets under their belts, are increasingly leaning into professional advice.
“The 2025 survey shows a 3% uptick in financial advisor usage, which may indicate the start of a trend. It might suggest that investors are turning to experts to complement their own research, especially given market volatility,” concludes Nasdaq. “Across all ETF holders, help with growing and protecting investments is considered to be financial advisors’ most important role. As a group, high-dollar investors—those with $250,000 or more in the market—are increasingly learning about ETFs from financial advisors (82% in 2025 compared with 79% in 2024). ”
