Artificial intelligence also wins among investors. While clean energy, infrastructure and cybersecurity are marking time. Ark Invest Europe analyzed the 2023 flows for the European thematic ETFs. Listed funds, dedicated to specific sectors, for which the year just ended was not particularly brilliant, with outflows exceeding inflows by around a billion dollars. However, the analysis of the flows of these tools allows us to identify precise trends by investors, for the possibility of investing in a basket of securities representing a sector or sector and taking the benefits of a market trend by reducing the risk and volatility linked to exposure to a single security.
Undisputed winner
For this category of investments, 2023 ended with 2.2 billion dollars incoming flows. “As already observed several times during the year – says Rahul Bhushan, co-founder of Rize ETF and Managing Director of Ark Invest Europe -, the topic Robotics, automation and AI was the undisputed winner, with a collection of over 1.4 billion dollars, equal to 65% of total inflows”.
In second place were ETFs on Luxury goods, which recorded inflows of $206 million. We note, however, that these were concentrated in Q1 2023, driven by the China reopening narrative, without managing to continue the momentum throughout the year.
Other noteworthy inflows were also seen in ETFs categorized under the broad theme Climate and environment. In 2023, in our opinion, a clear investor preference has emerged towards broader ETFs on the green transition, rather than those focused on specific areas. This trend is exemplified by an ETF on the environmental transition in the USA, which has already raised around 92 million dollars despite having only been launched in September 2023.
The approach to environmental investments changes
From the point of view of outflows, in 2023 they amounted to -3.2 billion dollars. “These notable outflows focused mainly on three themes, but for very different reasons – continues Bhushan -. ETFs Clean Energy they saw the largest outflows in 2023, at $694 million. Investors clearly preferred broader ETFs allocated to the green transition, and this was also due to performance: clean energy ETFs not only significantly underperformed the market, but also other funds linked to environmental themes”.
Even ETFs on Infrastructure they recorded significant outflows, with 550 million dollars. However, it should be noted that the outflows were concentrated on traditional infrastructure ETFs, and not on sustainable and future-oriented ones. For this reason, as Rize ETF/ARK Invest we support that Investors should now look at infrastructure investments from a sustainable perspectivealigning with how governments and other supranational bodies intend to allocate future infrastructure investments.
Profit taking on Cybersecurity
Finally, ETFs on Cybersecurity they recorded, during 2023, 507 million dollars in outflows. Unlike the previous two, this theme has anything but underperformed from a performance point of view, on the contrary: Cybersecurity ETFs have seen incredible results in 2023, despite a higher rate environment. This shows how cybersecurity is undoubtedly one of the main megatrends to be exposed to. Our conversations with clients show that investors have mostly taken profits, particularly those who entered the theme in 2022, when there were as many as $877 million in inflows into this theme.
This article has been prepared for informational purposes only and does not constitute consultancy or solicitation to buy or sell financial instruments. The information reported is in the public domain, but may be subject to change at any time after publication. We therefore decline any responsibility and remember that any financial transaction is carried out at your own risk.