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What are we looking for?

Top- and bottom-performing thematic investments, highlighting risks and opportunities

The screen

Last November, I wrote a column about thematic ETFs. Recall that these types of investment funds often tout exposure across traditional economic sectors with the goal of exploiting a long-term trend. Big data, robotics and automation, e-sports, wearable tech and, yes, even cannabis are considered investment themes. Morningstar’s study on thematic investments points to the fact that over the past 15 years, the minority of thematic investments ended up surviving. Of those that did, less than half outperformed a plain vanilla global equity benchmark.

These figures echo what we’ve seen here in Canada. Since 2019, 33 thematic funds have either been liquidated or merged into other funds. Admittedly six of these funds were tied to the Emerge ARK saga, which had more to do with fund administration and stewardship issues than fund performance. Excluding those, the funds that closed after 2019 were, on average, on the market for just over three years (1,141 calendar days). Today, there are roughly 64 Canadian-domiciled thematic mutual funds and ETFs available for sale in Canada. Unexpected liquidation has the potential to trigger a taxable event, which may be consequential for the investor if held outside a tax shelter.

That being said, thematic investments do offer the potential for outsized gains and arguably may have a place as a satellite or small portion of asset allocation. Today, we exemplify the top and bottom performers in this space to highlight just how varied returns have been. To find these funds, I used Morningstar Direct to screen for Canadian-domiciled mutual funds and ETFs that Morningstar has placed in our thematic fund taxonomy. The taxonomy is based on intentionality, which is determined by analyzing a combination of fund legal name, investment policy, investment strategy and information gleaned from publicly available data sources such as prospectuses, marketing materials and index methodologies. Only the oldest share class of each fund was included in this analysis.

What we found

Thematic winners and losers

NameTickerMorningstar CategoryBroad ThemeMER(%)Morningstar Ratin for FundsMorningstar Medalist RatingTotal Ret YTD (%)Total Ret 1 Yr (%)Total Ret Annlzd 3 Yr (%)Total Ret Annlzd 5 Yr (%)Total Ret Annlzd 10 Yr (%)Inception Date
Top 10 Performers
CI Global Longevity Economy PGlobal EquitySocial0.165 Stars27.338.711.96/11/2020
IA Clarington Thematic Innov Cl F5US EquityBroad Thematic1.283 StarsNegative30.544.210.416.710.56/25/2014
First Trust IndxxInnvtvTrsctnandPrcssETFBLCK-TSector EquityTechnology0.8122.035.98.212.33/23/2018
Harvest Brand Leaders Plus Inc ETF UHBF-U-TUS EquitySocial0.922 StarsNeutral18.724.78.111.47/24/2014
iShares Global Water ETF CommCWW-TSector EquityPhysical World0.6617.433.75.711.211.96/4/2007
Manulife Global Thematic Opps FGlobal EquityBroad Thematic1.073 StarsBronze17.435.55.49.510/11/2018
Global X Big Data & Hrdwr ETFHBGD-TSector EquityTechnology0.5812.667.55.332.36/20/2018
Franklin Innovation FGlobal EquityTechnology0.921 Star31.249.54.41/22/2021
Fidelity Disruptors Class FGlobal EquityTechnology1.131 StarBronze20.739.22.09/28/2021
Fidelity Disruptive Automation Cl FGlobal EquityTechnology1.111 StarBronze12.128.01.89/28/2021
Bottom 10 Performers
Yrkvll Crypt Blckchn and FnTch OppsClSrFSector EquityTechnology0.0016.639.8-11.35/28/2021
BMO Clean Energy ETFZCLN-TGlobal Small/Mid Cap EquityPhysical World0.392 StarsSilver-10.71.9-12.71/26/2021
Blockchain Technologies ETFHBLK-TSector EquityTechnology0.9813.784.8-13.225.32/2/2018
Ninepoint Alternative Health ASector EquitySocial3.437.811.4-14.3-4.63/26/2017
Harvest Clean Energy ETF Class A unitsHCLN-TGlobal Small/Mid Cap EquityPhysical World0.691 StarNeutral-13.5-1.7-17.91/11/2021
First Trust Nasdaq Clean Edge GreenEyETFQCLN-TGlobal Small/Mid Cap EquityPhysical World0.741 StarBronze-16.9-6.2-18.3-12.010/29/2014
Global X Lithium Producers ETFHLIT-TSector EquityTechnology0.88-36.0-31.2-20.56/22/2021
Evolve Automobile Innovation ETF HCARS-TSector EquityTechnology0.63-12.7-3.4-25.00.49/27/2017
Global X Marijuana Life Sciences ETFHMMJ-TSector EquitySocial0.9515.528.9-28.3-21.34/4/2017
Purpose Marijuana Opportunities ETFMJJ-NESector EquitySocial1.130.8-4.1-34.8-18.21/31/2018

Source: Morningstar Direct | Data as of October 22, 2024

The top and bottom 10 performers within the Canadian-domiciled thematic investment fund and ETF space are listed in the table accompanying this article. Though most of the thematic fund universe analyzed today has at least a one-year track, I am of the belief that this is far too short a period to judge any investment’s merit. On the other hand, only 20 of the surviving funds have more than a five-year track record. As a compromise, I’ve used the three-year trailing returns as the basis of today’s ranking, which encapsulates 32 of the 64 available thematic funds. Alongside trailing returns, I’ve also displayed MERs, categories, themes and Morningstar’s ratings, if available.

This article does not constitute financial advice; it is always recommended to conduct one’s own independent research before buying or selling any of the funds mentioned in this article.

Ian Tam, CFA, is director of investment research for Morningstar Canada.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 04/10/24 11:59pm EDT.

SymbolName% changeLast
BLCK-T
First Trust Indxx Innov Trans Proc ETF
+5.73%32.29
HBF-U-T
Harvest Brand Leaders Plus Income ETF USD
0%11.64
CWW-T
Ishares S&P Global Water ETF
+1.53%59.88
HBGD-T
GX Big Data & Hardware Index ETF
+5.86%30.7
ZCLN-T
BMO Clean Energy Index ETF
-5.71%13.54
HBLK-T
Blockchain Technologies ETF
+14%18.56
HCLN-T
Harvest Clean Energy ETF
-6.2%8.17
QCLN-T
First Trust Nsdq Cln Edg Green Enrgy ETF
-1.34%15.5
HLIT-T
GX Lithium Producers Index ETF
-3.08%17.3
CARS-T
Evolve Automobile Innovation Idx Hgd ETF
-0.84%20.14
HMMJ-T
GX Marijuana Life Sciences Index ETF
-6.2%10.29
MJJ-NE
Purpose Marijuana Opportunities Fund
-19.22%5

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