Investment Professionals

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Thematic ETFs had a rough first quarter, falling as much, or more than global share market gauges like the MSCI World Index. The slow start follows two strong years in 2020 and 2021, where several thematics provided strong outperformance. Biotech in many ways exemplifies this reversal of fortunes. After being the best performing sector in 2020, thanks to coronavirus vaccine development, the sector fell 40% in the 12 months to Q1. While the causes of underperformance vary between funds, common roots include the Russian invasion of Ukraine, which threatens supply chains. And the Federal Reserve’s hawkish stance, which has put a dampener on growth companies. Below we look at each thematic in more detail. ETFS Hydrogen ETF (HGEN) HGEN fell 11.5% in Q1, thanks to rising interest rates and Senator Manchin vetoing US subsidies for clean hydrogen. HGEN is especially sensitive to higher discount rates as the majority (16 out of 30) of the companies it holds are loss-making. While HGEN’s performance is negative this year, in March, HGEN rallied 12.8% on a more dovish Fed). ...