News Digest:

Thematic investing in 2024 showcased a dynamic mix of opportunities and challenges. While themes like AI, crypto, and infrastructure thrived, others, including clean tech and electric vehicles, faced significant headwinds. Declining investor interest in these previously favored sectors, coupled with slower adoption rates and supply chain concerns, hindered their performance.

Performance disparities were stark. Crypto-themed ETFs experienced a resurgence, with some funds surging nearly 80% year-to-date, fueled by post-election momentum. An eSports and Gaming ETF rose 52%, largely driven by a 1,000% gain from AppLovin. Conversely, themes like clean energy, rare earth metals, and agribusiness struggled to keep up.

Thematic ETFs collectively underperformed the S&P 500, which soared 28%, marking one of its best years on record. Over 70% of the largest thematic ETFs failed to beat the index, with an average return of just 16.2%. Net redemptions reached $7 billion, marking the first negative flow year for thematic ETFs. AI and infrastructure ETFs attracted $4 billion in inflows but could not offset significant outflows from Ark-managed ETFs, which lost $4.8 billion.

Despite waning interest in traditional thematic funds, risk appetite remains strong, evidenced by the growth of U.S.-listed Bitcoin ETFs and specialized leveraged products, signaling evolving investor preferences.