FEATURED ISHARES ETFS
Models & SMAs
Models & SMAs
CLIENT RESOURCES
The below is a Q+A between Jeff Spiegel, U.S. Head of iShares Megatrends, International and Sector ETFs, Fritz Folts, Chief Investment Strategist at 3EDGE Asset Management, and Eric Biegeleisen, CFA, Deputy CIO at 3EDGE Asset Management.
3EDGE is a leading multi-asset investment management firm serving institutional investors, the advisor marketplace, and private clients, and manages over $1.6 billion in combined AUM and AUA.1
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The world is changing rapidly, and clients understand this. Investors are looking for ways to access long-term, structural growth themes across sectors, geographies and market caps. While broad equity markets have enjoyed strong returns over the past decade, events of the past few years ranging from the pandemic to geopolitical conflict to inflation have led investors to seek out potential areas for durable growth. Traditional, market-cap weighted benchmarks tend to have negligible exposure to exciting themes such as genomics, clean energy and cybersecurity,2 meaning intentional decisions could be required to access these themes. According to a recent survey of 386 institutional investors, 88% of investors are looking to add Megatrends exposure in the next five years.3
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We view Megatrend ETFs as transparent, liquid, cost-effective tools that provide exposure to specific companies that are levered to a particular theme. These ETFs allow portfolio managers to focus more on allocating to specific themes rather than individual companies, offering more portfolio diversification than a single stock selection approach and without the constraints of a sector approach. Megatrend index ETFs are designed to provide beta to different themes; these ETFs leverage a variety of strategies for security selection such as data-driven revenue screens or bottoms-up, fundamental research. These ETFs also typically take a bespoke approach to weighting that is unique to each subtheme, with the common goal of providing thematic beta.
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At 3EDGE we have conviction in a variety of Megatrends themes. We also have an extensive track record of active investing, and we believe using Megatrend ETFs to express our thematic views allows us to tactically shift our views depending on our market convictions.
We’re very excited by the prospect of using megatrend ETFs to access thematic exposure for our clients. Many of the themes cut across sectors and geographies, making it difficult for traditional strategies to capture, and so its nice to have a suite of products to draw from to more adequately and easily express our views and manage our risk.
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Megatrends is among the fastest growing categories of ETFs, seeing inflows of $80B+ over the past few years, massive growth for a category which started 2020 with roughly $35B in total assets!4 So, the demand has clearly been growing. Megatrend ETFs offer investors a way to access a theme they may have conviction in, and we think we are still only seeing the start of it. According to a recent survey, 50% of investors see a greater need for thematic models.5 As the number of Megatrend ETF offerings grow investors might have to increase their due diligence of the different fund offerings, as an alternative some investors could look to ETF models as an area to consider for diversified exposure to a variety of themes.
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1 $1.33 Billion in AUM as of 6/30/22. Additionally, over $237M in AUA as of 3/31/22. Assets Under Advisement includes non-discretionary assets managed by other registered investment advisers using 3EDGE’s model portfolios.
2 Based on analysis of S&P 500 index which reflect exposure of 0.58%, 0.21% and 0.23% to genomics, clean energy and cybersecurity respectively as measured by overlap with the NYSE FactSet Global Genomics and Immuno Biopharma Index, S&P Global Clean Energy Index and the NYSE FactSet Global Cybersecurity Index. Data as of 6/15/22.
3 Brown Brothers Harriman 2022 Global ETF Investor Survey
4 Morningstar as of 5/31/22. Data from Morningstar’s Global Thematic Funds Landscape dataset. For purposes of this piece, we are using the term “Megatrends” and “Thematic” investing interchangeably. Flows are subject to change.
5 Natixis 2021 Professional Fund Buyer Outlook. 400 correspondents surveyed across 21 countries through North America, Latin America, Asia, and EMEA. Correspondents include private banks, family offices, RIAs, Wirehouse broker dealers and others.
Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses, which may be obtained by visiting the iShares Fund and BlackRock Fund prospectus pages. Read the prospectus carefully before investing.
Investing involves risks, including possible loss of principal.
Funds that concentrate investments in specific industries, sectors, markets or asset classes may underperform or be more volatile than other industries, sectors, markets or asset classes and than the general securities market.
There is no guarantee that any fund will pay dividends. Diversification and asset allocation may not protect against market risk or loss of principal. Funds that concentrate investments in specific industries, sectors, markets or asset classes may underperform or be more volatile than other industries, sectors, markets or asset classes and the general securities market.
Technology companies may be subject to severe competition and product obsolescence.
Buying and selling shares of ETFs may result in brokerage commissions.
There can be no assurance that an active trading market for shares of an ETF will develop or be maintained.
Diversification and asset allocation may not protect against market risk or loss of principal.
This material represents an assessment of the market environment as of the date indicated; is subject to change; and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any issuer or security in particular.
The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any strategies discussed will be effective.
The information presented does not take into consideration commissions, tax implications, or other transactions costs, which may significantly affect the economic consequences of a given strategy or investment decision.
This material contains general information only and does not take into account an individual's financial circumstances. This information should not be relied upon as a primary basis for an investment decision. Rather, an assessment should be made as to whether the information is appropriate in individual circumstances and consideration should be given to talking to a financial professional before making an investment decision.
The Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
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