ETF News

Thematic ETFs offer array of investment options

Exchange traded funds (ETFs) offer the professional management and diversification of the fund but as they are listed on stock exchanges, can be bought and sold like shares.

Writing on Trading Markets, Sabrient Systems managing director Scott Martindale said this has made them a "compelling alternative" to traditional investment options such as mutual funds.

ETFs give investors exposure to a basket of securities and in some cases entire indices, such as the S&P 500 Index of major US stocks or the FTSE 100 list of leading shares.

However, Mr Martindale said, ETFs are not limited to equities. They can track bonds, commodities or futures contracts.

Others operate in specialist thematic areas like nanotechnology or infrastructure.

Roger Nusbaum of the Street said these thematic ETFs could become increasingly important over the next decade because they can avoid the kind of "sector distortions" that the bursting of the dot.com bubble or the banking crisis caused in broad-based indices.

This allows investors to pick an area such as infrastructure, which is likely to benefit from domestic and foreign stimulus spending as a result of the global economic downturn.

A thematic ETF in this area would track a basket of builders, engineering firms and retailers likely to benefit from such spending without the client having to worry about the impact of negative news in other areas of the market.

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