BlackRock Inc., the world’s largest asset manager, is jumping further into the thematic exchange-traded fund arena.
The firm is focusing on creating ETFs based on what it calls “megatrends.” These forces “will change the trajectory of the global economy, drive innovation and redefine business models for decades to come,” BlackRock said in a note before a press conference in New York on Thursday.
To capitalize on these ideas, the firm recommends casting off traditional sector and geographic focuses for unconstrained equity exchange-traded funds.
The trends are: technological breakthrough, demographics and social change, rapid urbanization, climate change and resource scarcity, and emerging global wealth. BlackRock is creating two funds based on these themes: the iShares Cybersecurity and Tech ETF and the iShares Genomics Immunology and Healthcare ETF. They will trade as IHAK and IDNA, respectively.
BlackRock, the world’s largest issuer of ETFs, is working to expand its iShares offerings beyond broad indexed products, where management fees are under intense pressure. With some of its offerings charging as little as 30 cents for every $1,000 invested, it’s seeking to develop more sophisticated funds that can also charge higher fees.
Thematic ETFs, which look at stocks across industries in areas like artificial intelligence or electric cars, have grown to almost $47 billion in the U.S., according to data from Bloomberg Intelligence. While that pales in comparison to the roughly $3 trillion across stock ETFs, assets have more than doubled over the last two years. These funds charge an average $6.50 for every $1,000 invested, versus the $4.90 charged by stock ETFs.
BlackRock took a big step into this arena a year ago, starting the iShares Robotics and Artificial Intelligence ETF, which trades as IRBO. The fund hasn’t gained much traction. It manages just $38 million.