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Thematic Funds For The Tactical Sleeve

Mar. 02, 2021 4:38 AM ETARKK, KOMP, LOUP, MATFX, MITEX, XITK10 Comments
Richard Shaw profile picture
Richard Shaw


  • Thematic funds for portfolio tactical sleeve.
  • Anchor with multi-theme fund, supplement with single theme funds.
  • LOUP, ARKK, XITK, KOMP, and MATFX are attractive multi-theme funds.

(This is a recent letter to QVM Clients):

In your tactical sleeve, most of you would probably be better served with actively managed (or “active” rules-based managed) multi-theme ETFs or mutual funds with good performance and a solid manager or attractive rules, rather than taking individual stock positions.

Funds have far less idiosyncratic (single security) risk than single stocks, and they can take more positions than you reasonably could. The funds, or the rules, are constantly evaluating the suitability of their holdings to their strategy for potential change, with a team of experts applying a level of scrutiny that neither you nor I could muster or apply.

The ETFs at least are more able to make changes within their portfolio in a tax efficient manner than is possible for you to do if you held the same individual stocks and made the same changes.

There has been a flood of new thematic funds released in the past few years. There are many single theme funds, and a smaller number of multi-theme funds. I believe that a thematic approach within a tactical sleeve should be anchored by multi-theme funds, and supplemented, if desired, by single theme funds. Just as individual stocks increase and decrease in appeal, so do themes. That makes multi-theme funds more likely to perform well. Of course, there are/will be individual theme funds that outperform multi-theme funds, but it is difficult to know which those will be.

Among the multi-theme funds, there is a small number of somewhat consistently top performers. There are five such funds that I believe are the better choices – all of which I utilize for myself. They are:

  • LOUP: Loup Frontier Technology ETF
  • ARKK: ARK Innovation ETF
  • XITK: FactSet Innovative Technology ETF
  • KOMP: S&P Kensho New Economies ETF

This article was written by

Richard Shaw profile picture
Richard is the managing principal of QVM Group LLC, a fee-based investment advisor based in Connecticut, with clients across the country. . QVM manages portfolios uniquely designed for each client on a flat fee basis through the client’s own accounts at Schwab; and provides investment coaching to "do-it-yourself" investors. The investment approach is based on value, asset allocation, expense control, risk management, customizing portfolios to each client's specific circumstances, and regular communication about strategy and absolute and benchmark performance.   Richard's extensive experience includes having served as a Board Director of Phoenix Investment Counsel, a U.S. pension and mutual funds manager, now Virtus Investment Partners (New York Stock Exchange: VRTS http://www.virtus.com); as Managing Director of Phoenix American Investment in London; and as a Board Director Aberdeen Asset Management PLC in Aberdeen Scotland (http://www.aberdeen-asset.com  then listed London Stock Exchange, now a subsidiary of Phoenix Group inthe U.K.).  He has been a Trustee of a $500 million pension fund, and was a charter investor and member of the Board of Directors of several internet companies, including Lending Tree (NASDAQ: TREE http://www.lendingtree.com) prior to its IPO.   He is a 1970 graduate of Dartmouth College.   QVM Group LLC is a Registered Investment Advisor.   Visit the QVM Group website (http://www.qvmgroup.com) or its blog (http://www.qvminvest.com).

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Comments (10)

Great post.
NV_GARY profile picture
XITK Listed 2X in top holdings- No KOMP
Richard Shaw profile picture
@NV_GARY thanks i will get that fixed
Richard Shaw profile picture
@Richard Shaw Still trying to get SeekingAlpha correction unit to make the correction -- no luck so far -- disappointing
sc21 profile picture
Thanks for the summery of an important and interesting sector. A bit surprised though that you did not include Tony Kim and his group of funds i.e. bst, bstz and the open ended bgsix or do you not consider them in the same sector. Interested in you take. tia sc
Richard Shaw profile picture
@sc21 BGSIX, for example, is a good fund. We have owned it before, but it is a bit too conventional and consensus for our purposes. Top 5 for example: Apple, Tesla, Microsoft, Amazon. Good performance, but not better than those in our list. Over 1 year and shorter periods it underperformed each fund in our list. Over three years, it was in the middle of the pack. But the big issue for us is the lean to the obvious big names which is not our focus in selecting the funds in this letter.
sc21 profile picture
@Richard r
Thank you for your timely reply. I understand your point. Have to look more closely at your list which I will do later in the day. Over the last few months with the success achieved by Ark, there seems to have been a flowering of new funds in the area. This can only be of help if we can understand the differences between funds. Thanks again your efforts. SC
siestadreamer profile picture
Thanks for an interesting article, @Richard Shaw. Despite the differences that you point out between the funds, their performance appears to be quite highly correlated (just eyeballing figure 3). I wonder if the underlying “super theme” of disruption/innovation explains most of the results.
Richard Shaw profile picture
@siestadreamer I think there is probably a general asset flow into and out of the disruption/innovation "super theme" Over time, there will be dispersion that differentiates the various funds and the various themes even though there is high correlation
Am also in XITK and KOMP. Two others you might want to look at are ANEW and WWOW.
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