BlackRock has launched two exchange-traded funds (ETFs) designed to capitalize on what the world’s largest asset manager says are permanent changes in the economy and the market. The new ETFs, iShares Emergent Food and AgTech Multisector ETF (IVEG) and iShares Blockchain and Tech ETF (IBLC), are examples of thematic investing. They aim to benefit from “underestimated investment opportunities” based on emerging structural changes. Here’s what it means for investors.
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Consider working with a financial advisor as you seek to position your portfolio to profit from emerging changes in the market.
What Is Thematic Investing?
Thematic investing, as exemplified by the new BlackRock ETFs, involves extensive research to identify long-term trends. This investment style should not be confused with sector investing, which targets a particular company or sector. Thematic investors build a comprehensive portfolio that focuses on a specific trend and it’s common for a long-term trend to stretch across multiple sectors.
Thematic investing, which currently accounts for a mere 3% of the U.S. ETF industry, begins by discovering themes and categories that you believe will grow in the future. As an investor, you can choose to invest in a theme that aligns with your personal values and expectations. A few examples of themes include cybersecurity, rapid urbanization and social change.
Once you’ve identified a trend, you’ll need to find companies that reflect your investment goals and risk tolerance. And as your portfolio grows, you’ll need to rebalance it regularly to make sure it stays in line with your goals.
What’s Driving BlackRock’s New Thematic Offerings?
The firm says that structural shifts permanently – and fundamentally – changing the global economy and society accelerated in 2020, leading to increased investor demand for strategies that go beyond traditional sector, market capitalization and geographic classifications. Three such shifts are key:
New consumers. Millennials and developing market consumers are emerging from lockdowns as the major spenders driving the global economy. Their ascendence means their unique preferences for decentralized digital ecosystems and greener goods will transform commerce as we know it, according to the private equity firm.
Industrial ‘renaissance.’ Since the start of the pandemic, average shipping times from Asia to North America have risen by 125%. Domestic freight costs rose by 42% in 2022 vs. 2021, and inputs such as lumber are 165% more expensive than pre-pandemic levels. At the same time, geopolitical uncertainty is leading more firms to re-shore production and diversify supply chains. All of this is occurring amidst substantial wage inflation. That puts a premium on robotics, infrastructure and transportation initiatives like autonomous and electric vehicles.
Medical technology. Black Rock says the progress made in genomics, immunology and precision medicine technologies is at an inflection point in which we could begin to see an acceleration of medical breakthroughs and treatments. As an example, the firm cites the accelerated pace of mRNA vaccine development.
BlackRock’s New Exchange-Traded Funds
The launch of BlackRock’s two funds, part of its iShares line, extends the firm’s offering of thematic funds to 20 index and active ETFs.
“Megatrends are driving the world’s economic, social and technological transformation, presenting tremendous investment opportunities and investor demand,” said Armando Senra, head of iShares Americas. “We are still in the early days of growth for these funds. iShares projects that the megatrend category is projected to grow 500% to $250 billion by 2024.”
Each of the two new ETFs, both of which are global, multi-cap funds, carries an operating expense ratio of 0.47%.
- iShares Emergent Food and AgTech Multisector ETF (IVEG)
This ETF tracks the investment results of an index composed of companies from U.S. and non-U.S. markets that are expected to benefit from creating or using advances in agricultural technology, alternative proteins, sustainable food product and packaging and nutritional innovation. Key holdings include Mosaic, Archer Daniels Midland, Nutrien and Bayer.
- iShares Blockchain and Tech ETF (IBLC)
This ETF tracks the investment results of a rules-based index composed of U.S. and non-U.S. companies involved in the development, innovation and utilization of blockchain and crypto technologies. IBLC does not invest directly in cryptocurrencies or crypto derivatives. Key holdings include Marathon Digital Holdings, Coinbase Global, Riot Blockchain and Galaxy Digital Holdings.
Bottom Line
BlackRock, the world’s largest private equity firm, has increased its iShares “megatrends” offerings to 20 with the introduction of iShares Emergent Food and AgTech Multisector ETF and iShares Blockchain and Tech ETF, both global, multi-cap funds. They seek to give investors the chance to profit from what the firm says are permanent changes in the market. Keep in mind that these funds are new and so have no track record. Both funds carry a 0.47% operating expense ratio.
Tips on Investing
- Being able to identify “megatrends” and figuring out how to capitalize on them is a challenge. That’s where the insights and guidance of a financial advisor can be invaluable. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Check out our free investment calculator to get a quick timeline of your investments’ prospects.
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