Thematic exchange-traded funds (ETFs) in Australia have seen flows of some $600 million in 2024, with more than 40 products now available for local investors to choose from.
Marc Jocum, investment strategist at Global
“We have seen a lot of interest in semiconductors and are also a major benefactor of the AI revolution we are currently seeing.”
AI technology providers, particularly semiconductor companies, have emerged as early winners in 2024, capitalizing on the strong demand for AI. According to Global X, the global semiconductor industry is expected to reach approximately $1.2 trillion by 2030.
“There has also been a lot of interest in cybersecurity, broader robotics and artificial intelligence,” Jocum said.
Robotics and artificial intelligence ETFs saw their popularity more than double from 2023, according to previous data from Global X. Meanwhile, local investors had already invested $30 million in cybersecurity ETFs as of March this year, a stark contrast to the $270,000 in net flows recorded for all of 2023.
Even though some megatrends have already enjoyed impressive inflows in 2024, Jocum noted that there are still sectors that still have time to recover.
“One area that could be very interesting is U.S. infrastructure,” he said.
“This is quite a large area in the United States, given the scale of work they have to do on some of the local infrastructure there.
“This is certainly an area where I see potential for improvement and strong growth ahead, given the fiscal support we’ve also seen from some of the U.S. government.”
Global growth for companies in this sector.
Additionally, the American Society of Civil Engineers, as recently as 2021, gave U.S. infrastructure a “poor rating,” highlighting significant infrastructure investment opportunities across the country. Atlantic.
Who are the leads?
However, not all major trends in the booming technology sector have ridden the thematic wave. According to Jocum, sectors such as cloud computing, virtual reality and video games have seen capital outflows so far this year.
“I think there are some pockets that just haven’t been as popular, because those areas were very popular a few years ago,” he said.
Additionally, food and agriculture funds also saw modest capital outflows in 2024, particularly in the first quarter of the year. By the end of March, according to Global X, food and agriculture had seen larger net outflows than any other sector.
Jocum also highlighted electric car and battery technology ETFs as an intriguing theme.
“Interestingly, although we have seen some capital outflows, investors remain quite hesitant because they believe in the transition to electric vehicles,” he said.
“It’s pretty much the same thing in the United States. We’ve seen a lot of money flowing out of lithium and battery ETFs. But you know, this could be an area of opportunity, given that it’s quite undervalued at the moment.
Although some unpopular megatrends have seen capital outflows in 2024, Jocum noted that the penetration of thematic ETFs in Australia remains impressive overall.
Thematic ETFs in the United States make up just 1 percent of the total ETF sector, but they make up 3 percent in Australia.
“In Australia, we are seeing some positive flows when it comes to thematic ETFs… which means penetration might be a little bit harder here in Australia, even earlier here,” Jocum said.
