What Are The Best Performing Theme ETFs

In a universe of over 9,000 Exchange Traded Funds (ETFs), the best-performing ETFs may surprise. In 2023, there were two big stock ETF trends.

How have “themed” ETFs performed?

In general, thematic exchange-traded funds (ETFs) focus on industries, trends, or themes like technology or sustainability.

Investors can align their interests or investment strategies with their chosen beliefs.

The answer is that it is mixed. Inflows into thematic ETFs almost halved in 2023, US$759m versus US$1.4bn the previous year. This was well below the $12.2bn inflows in 2021.

Clean energy ETFs are on track for another rough ride in 2024. Factors that led to their poor performance last year look set to continue.

Energy transition ETFs performed poorly, while many tech-focused ETFs had a stellar year.

As we move along 2024, not all thematic ETFs have suffered.

Artificial Intelligence and Semiconductors are hot

Artificial intelligence and semiconductors have hardly been out of the news in recent months.

Riding the wave of popularity in the media of artificial intelligence and semiconductors.

Artificial intelligence boosted the technology sector again in 2023 as Microsoft’s (MSFT) moves with ChatGPT ignited markets.

Meta (META) also announced plans to push hard into the AI space for its Facebook and Instagram platforms.

Morgan Stanley predicted that mobile AI applications will cause a semiconductor arms race to produce better chips in smaller packages.

Unsurprisingly, investors poured large sums into semiconductor and artificial intelligence ETFs in the US in January. Investors are banking on the two themes extending their hot streak in 2024.

The AI index returned 7% over January, while the Semiconductor Index rose a spectacular 10% in January.

Both these tech-focused themes saw ETFs with these themes register the highest gains in 2023.

Note: This does not include crypto gains.




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