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Equity
May 09, 2025|ByJay JacobsScott Gladstone
If markets are more thematic and dynamic than ever; shouldn’t your portfolio be too? Learn how THRO, the iShares U.S. Thematic Rotation Active ETF, can offer a streamlined way to identify and invest in themes driving markets.
Key Takeaways:
- Themes are driving markets: Markets are increasingly shaped by powerful themes—like reshoring, artificial intelligence, infrastructure, and GLP-1 —that are capturing both headlines and investor demand.
- Dynamically navigate today’s volatility: In an uncertain market environment, an active thematic rotation strategy can provide flexibility to adapt as conditions evolve—helping identify potential alpha opportunities at scale while enhancing diversification.
- A portfolio-ready solution for thematic exposure: The iShares U.S. Thematic Rotation Active ETF (THRO) can make it easy for investors to access timely thematic opportunities. THRO systematically identifies, implements and tactically allocates across themes within a single, actively managed ETF purpose-built to fit within a Large Cap Core allocation.
Themes: Why now?
Tariff uncertainty and global trade turmoil, among others, have become central themes shaping markets today. How companies are responding to new trade policies will differ by sector, industry and region. The ensuing market volatility has been influencing how investors are seeking to build their portfolios in an effort to weather ongoing turbulence – and capture potential opportunities. In these extreme market conditions, active rotation ETFs like THRO can seek to outperform by dynamically evaluating which companies may be primed to maneuver challenges based on their thematic exposures.
THRO: A dynamic solution for today’s volatility
The iShares U.S. Thematic Rotation Active ETF (THRO) seeks to outperform equity markets by leveraging quantitative signals to dynamically identify, evaluate, and rotate across key themes driving markets. Harnessing the potential of thematic opportunities involves accurately identifying a wide breadth of themes, mapping their associated companies, and timing entry and exit points into and out of those exposures, as illustrated in the figure below.
Figure 1: Our approach - Identifying, Implementing, Timing
Source: BlackRock Systematic, for illustrative purposes only.
THRO’s process leverages alternative data and technology to monitor how themes develop and interact in real-time, incorporating a breadth of insights to navigate the thematic landscape. By analyzing millions of data points, ranging from news to earnings calls, to broker baskets, we can identify hundreds of AI-derived themes over time – potentially before the market starts to piece together emerging trends.
A portfolio-ready solution for thematic exposure
THRO offers a systematic, actively managed approach to thematic investing—identifying high-conviction themes, timing entries and exits, and managing tracking error through stock selection — all within a single fund. With a targeted 3–5% tracking error versus the S&P 500, THRO is designed to fit within the Large Cap Core category, making it a compelling option as a complement or partial replacement for traditional core equity exposures. This approach aims to give investors access to timely thematic opportunities without disrupting their overall portfolio-level risk. At the same time, it also introduces a unique potential benefit: a differentiated and complementary source of alpha.
Differentiated source of alpha
From 2021 to 2024, an analysis comparing THRO to commonly used investment approaches in U.S. large cap equities reveals low excess return correlation to both U.S. factor rotation (0.22) and a representative U.S. large cap stock selection strategy (0.13). These findings suggest that THRO may serve as a valuable complement to other alpha-seeking strategies in a diversified portfolio.
Source: BlackRock, as of December 31, 2024. For illustrative purposes only. Correlations are calculated using monthly excess returns data over the period December 2021 to August 2024, where excess returns are calculated as portfolio returns against the S&P 500 index for each fund. U.S. large cap stock selection strategy represented by Advantage Large Cap Core Fund (MALRX). For factors, a dynamic U.S. factor rotation strategy is represented by iShares U.S. Equity Factor Rotation Active ETF (DYNF). Excess returns for the U.S. thematic strategy are represented by iShares U.S. Thematic Rotation Active ETF (THRO). Correlation measures how two securities move in relation to each other. Correlation ranges between +1 and -1. A correlation of +1 indicates returns move in tandem, -1 indicates returns move in opposite directions, and 0 indicates no correlation. Past correlations not indicative of future correlations.
Investing involves risks, including possible loss of principal. Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. It is not possible to invest directly in an index.
To obtain more information on the fund(s) including the Morningstar time period ratings and standardized average annual total returns as of the most recent calendar quarter and current month end, please click on the fund tile. The Morningstar Rating for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure (excluding any applicable sales charges) that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
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Scott Gladstone
Senior Strategist for BlackRock Systematic
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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 prospectus page. Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal. Asset allocation and diversification may not protect against market risk, loss of principal or volatility of returns.
Only an investor and their financial professional know enough about their circumstances to make an investment decision.
Actively managed funds do not seek to replicate the performance of a specified index, may have higher portfolio turnover, and may charge higher fees than index funds due to increased trading and research expenses.
The Fund's use of derivatives may reduce the Fund's returns and/or increase volatility and subject the Fund to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. The Fund could suffer losses related to its derivative positions because of a possible lack of liquidity in the secondary market and as a result of unanticipated market movements, which losses are potentially unlimited. There can be no assurance that the Fund's hedging transactions will be effective.
Small-capitalization companies may be less stable and more susceptible to adverse developments, and their securities may be more volatile and less liquid than larger capitalization companies.
Securities issued in IPOs have no trading history, and information about the companies may be available for very limited periods. In addition, the prices of securities sold in IPOs may be highly volatile or may decline shortly after the IPO.
There is no guarantee that the classification system used to determine the rotation model or strategy will achieve its intended results. The fund may engage in active and frequent trading of its portfolio securities which may result in higher transaction costs to the fund. The fund is actively managed and does not seek to replicate the performance of a specified index.
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