At the start of the pandemic, ETF providers launched work-from-home and streaming-service funds to capitalize on changes to how we live. Now, providers are putting forward funds based on what life could look like after the pandemic, including the return of travel and live sporting events.
Other new ETFs play on positive social media-generated market buzz and increased investor attention in areas such as clean energy, space exploration and bitcoin.
Both the recently launched Roundhill MVP ETF (MVP-A) – an U.S. ETF that invests in sports franchises, sporting-goods companies and facilities – and Canada’s Harvest Travel and Leisure Index ETF (TRVL-T) – which invests in large-cap travel companies – are a play on the post-pandemic recovery, says Daniel Straus, vice-president of ETFs and financial products research at National Bank Financial.
“Travel is a huge industry that was very much battered by the pandemic and came to be the locus of investor interest for traders and investors who are gambling on a bounce back,” he says, adding that sports and entertainment could also be positioned as a pandemic-recovery play.
While many sports-fanatic investors might find the MVP ETF appealing – with holdings such as Madison Square Garden Entertainment Corp. and Manchester United Plc – investors need to consider the long-term profitability of sports franchises and venues, says Craig Ellis, vice-president and portfolio manager at Bellwether Investment Management.
“You obviously want some kind of return on your investment, not just to [invest in it] because you want to be the owner of a sports team, so to speak,” Mr. Ellis says.
Another novelty ETF, the VanEck Vectors Social Sentiment ETF (BUZZ-A), aims to capitalize on the investor interest in what social media buzz can mean to a stock’s performance.
“I could tell you the buzz around BUZZ,” quips Mr. Straus. “[It] has catapulted back to the attention of the Reddit rally around GameStop,” and he says people are taking that social media-driven trend seriously.
The ETF, which tracks the BUZZ NextGen AI U.S. Sentiment Leaders Index, chooses large-cap U.S. stocks with the most bullish investor sentiment based on content aggregated from online sources including Twitter, Reddit and StockTwits. The top three holdings as of April 9 included Square Inc., Apple Inc. and Amazon.com Inc. The ETF has returned around 4 per cent since it launched about a month ago.
“[BUZZ] has positioned itself as a way to use a dispassionate algorithm to try to identify the next meme stock,” Mr. Straus says, adding that he expects more ETFs will use artificial intelligence, deep learning and algorithmic trading in the future.
BUZZ is a timely product and “it’s impressive how quickly these ETF companies are able to bring some of these ideas to market while they’re still very much in vogue and in focus,” says David Kletz, vice-president and portfolio manager with Forstrong Global Asset Management.
Other novelty ETFs include the Harvest Space Innovation Index ETF (ORBT-T) and Emerge ARK Space Exploration ETF (EAXP-NE), both of which launched a couple of weeks ago and play off the growing focus on commercial space launches and space travel. These ETFs also invest in satellites, communication and space-equipment stocks, Mr. Ellis notes.
The long-term and growing cloud-computing trend is the focus of the Evolve Cloud Computing ETF (DATA-T), which is up about 5 per cent since it began trading in January. Some of its top holdings include Google parent Alphabet Inc., Oracle Corp., Microsoft Corp. and Zoom Video Communications Inc. in the top 10.
“That obviously has some excellent long-term trends behind it,” Mr. Ellis says of DATA. “The only caveat ... is that a lot of those stocks have had exceptional gains over the past year, year and a half, in particular, and valuations are pretty stretched.”
Another technology play cited by Pavan Khaira, fee-based-platforms associate at iA Private Wealth, is the Global X Data Centre REITs and Digital Infrastructure ETF (VPN-Q), which is up about 8 per cent since it began trading in October.
“It focuses on trying to provide exposure to companies that have business operations in the field of data centres, cellular towers and digital-infrastructure hardware,” Ms. Khaira says. “A lot of people are working from home, and I feel this [EFT] would capitalize on that.”
Other new ETF themes garnering investor attention right now include cryptocurrency, clean technology, renewable energy, marijuana and psychedelics.
Thematic ETFs like these can tell a great story and lure investors intrigued by the narrative, but investors should determine their investing style before buying, Mr. Ellis says.
“If they’re long-term investors ... they can play longer-term themes and really buy and hold these ETFs for the long run,” he says. “If they want to be shorter-term momentum investors, then they’re risking getting into these popular themes, and they’ve got to make sure they get out before the theme ends.”