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The Universe Of Thematic ETF Investing With ProShares' Scott Helfstein (Podcast Transcript)

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Lets Talk ETFs


  • Learn about thematic ETFs and what the future holds for the thematic investing market as more investors continue to pour money into the growing space.
  • ProShares offers a wide variety of thematic ETFs that are discussed in detail: (ONLN), (EMTY), (PAWZ), and (ANEW).
  • Scott Helfstein, Executive Director of Thematic Investing at ProShares, joins Jason Capul and the Seeking Alpha team to discuss the thematic investing landscape.

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Photo by oxtain/iStock via Getty Images

Editors' Note: Please note that due to time and audio constraints, transcription may not be perfect. We encourage you to listen to the podcast, embedded below, if you need any clarification. We hope you enjoy.


Show Notes:

  • 2:30 - Background of Scott Helfstein, Executive Director of Thematic Investing at ProShares.
  • 3:30 - What is thematic investing, and what qualifies something as a thematic exchange traded fund.
  • 7:00 - Does having to put the funds in an index tie an investor's hands?
  • 10:45 - Breakdown of ProShares thematic ETFs that have developed the most investor traction.
  • 19:45 - How important is thematic investing to the growth of ProShares business, and are there any future thematic ETFs that might come to market by ProShares?
  • 27:00 - How do you avoid making a thematic ETFs theme too narrow where it is unlikely to resonate with investors?
  • 32:15 - Where do thematic ETFs fit into an investor's portfolio, and how should exposure be looked at?
  • 38:00 - What does the future hold for the thematic investing space?

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Podcast Transcript:

Jason Capul: Welcome to Let's Talk ETFs. I'm your host, Jason Capul, and I've been monitoring the investment space throughout my entire career. Here at Seeking Alpha, I'm an ETF strategist and my role is to uncover and bring forward news and information to the investor community that is meaningful and actionable. Each week, different guests and I will take an in depth look at a particular aspect of the rapidly evolving exchange traded funds base, with a focus on how investors can best utilize ETFs to reach their investment goals.

Before we begin a brief disclaimer. This podcast is for entertainment and educational purposes only. Nothing said here should be taken as investment advice. All opinions expressed on this show are those of individuals expressing them alone. A full set of disclosures will be included at the end of this show. You can subscribe to Let's Talk ETFs on Apple podcasts, Google podcasts, Spotify, or whichever podcast platforms you prefer.

For reference purposes, this podcast is being recorded on the afternoon of May 12, 2021. Our guest joining the podcast today is Scott Helfstein, the Executive Director of Thematic Investing, over at ProShares. Scott comes to us today with a Bachelor's degree in Finance from George Washington University. He also holds a Master's degree with King's College London, as well as a Ph.D in public policy and Political Science from the University of Michigan.

Scott has been with ProShares for just about one year. And prior to ProShares, he was at Morgan Stanley for three years working in the Thematic Investment space. Scott has also held positions at BNY Mellon and the Federal Reserve. We're excited to have Scott here with us today to discuss our topic of Thematic ETFs.

So, with that, let's introduce and welcome Scott Helfstein.

Scott Helfstein: Thank you for having me, Jason.

JC: Absolutely. And we also do want to mention, we have not forgotten our familiar friend Jonathan Liss. He is also on the podcast with us as well. How you doing Jonathan?

Jonathan Liss: Yeah, doing well. Great to be back as always.

JC: Awesome. Awesome. So, let's get started guys. Scott, the way we usually like to kick things off is just giving our audience a little bit of information about who we're speaking with. So, if you'd be able to provide a brief introduction about yourself, a little bit about your role and responsibilities over at ProShares, things of that nature, that would be a great way to kick things off.

SH: Sure. So, as you mentioned, I've been at ProShares for just about a year, having worked both in the marketing strategy in Thematic Investing side at Morgan Stanley before that, and came over to really help them build out their Thematic business. ProShares has a series of thematic funds that touch on things like online retail and infrastructure. Look forward to getting into some of those details a little further.

But I have responsibility kind of across the business functions for Thematic. So, everything from the business strategy and product development, to client engagement and research. And it's an area we're really excited about. We plan on being a significant player here for years to come. And we're going to continue to build out.

JC: Excellent, appreciate the introduction.

JL: Sure. So I'll jump in here. So, for listeners that are maybe less aware of Thematic Investing, and we've certainly done a fair number of shows on specific Thematic ETFs, we've spoken to some of the kind of larger players in the Thematic space so, the Global Axis and the Amplifies clearly ProShares is up and coming player in the Thematic space.

Also, if you could just discuss with listeners, what Thematic Investing is all about and what qualifies something as a Thematic Investing opportunity as opposed to maybe a sector fund or strategic kind of offering?

SH: So that's a great question, Jonathan, partially because Thematic Investing is an inside baseball term. I would argue that, going back call it two years ago, there are very few people that used it. Now I think we see whether it's Barron's Wall Street Journal, almost daily articles on Thematic Investing. And so, the way we look at it is it's a way to break the style box, if you will.

Usually, we think about investing from a growth value perspective and market cap. Alternatively, you see sector allocation approaches and all of those are inherently backward looking. They're all taking existing paradigms, if you will, for the economy, and trying to Jeri rig them in a sense for the modern disruption, innovation and accelerated growth that we see across the economy.

So, what Thematic really tries to do is have a forward-looking approach to allocation, not be constrained by prior frameworks or categorizations. And try and identify parts of the economy and they can be different, some could be rapidly growing, others could be focused on cash flow, but focus on segments of the economy that we think makes sense to bundle up, or concepts or technologies that we think investors might want to hold.

And so, it's a more flexible, if you will, framework and approach that, I tend to think about it as the biggest risk that people probably face from an allocation perspective. It's not interest rates, it's not market cycles, it's not economic cycles, because if people buy and hold, if you invested in the very worst day of 2008 in the S&P 500, and you held your allocation, you did okay a decade later. You actually did quite well for yourself.

However, what I do think people need to protect against is essentially this innovation and disruption that's going on in the economy. So, I tend to think of Thematic Investing in particular as a good way to future proof for portfolio to make sure that you have a number of these technologies that are going to prove really important into the future.

JL: Sure. And I think before we move into some of the specific funds, and Jason will take over there. So, you're talking about getting away from a paradigm of kind of backwards looking or overly data mining kind of approach to investing. So again, the main factor boxes things like size, style, even things like momentum, maybe you're looking at not necessarily where it's getting to where the bucket is going, but looking at, okay, this is where these names are at. And I'm going to include them in the bucket.

That said, though, most Thematic funds, and there obviously are some exceptions to this are index based funds. And so, while I'm certainly very fond of Index investing, and I think it takes some of the human error out of the process, I wonder for more dynamic or the kinds of themes that are still kind of unfolding in real time, if having to put them inside of an index, as opposed to adding more flexibility. They’re kind of ties your hands as an investor to some extent.

SH: Well, one of the things we've seen is that Index Technology has changed quite a bit. And so, the Index that many people are familiar with S&P 500, Russell 1000, they all have rules. But the idea ultimately is that they can adapt to or the rules allow them to be sufficiently adaptive to target the parts of the economy that they want.

And, with Thematic ETFs, we've seen a range of products come into market, everything from truly active ETFs to where ProShares we are indexed, and we are passive. However, there are technologies like natural language processing, which we use in one of our products that is tied to the MSCI transformational changes Index. So, it's called ANEW which is focused on a series of accelerations that we think are a series of economic elements that we think were accelerated by the pandemic.

And uses an algorithm, a natural language processing algorithm along with the revenue contribution from certain types of business lines, to help identify the companies that kind of best fit the four transformational changes we were looking at. And those can change over time. As companies’ makeup their business lines change, as they either acquire or perhaps sell off another product.

So, while we tend to think of indexes as fixed, in fact, most of them are changing over time. And this new technology around things like, natural language processing or revenue attribution to companies where we can set up rules to try and target specifically what it is that we want in these indexes. So, we spend a lot of time focused on the rules, and on how we build it. Right. And we do that in conjunction with our Index partners, we can provide some ideas, they ultimately are responsible.

But it's about kind of creating the rules to get the right set of companies as the economies continue to evolve.

JL: Well, fascinating and really interesting response, I think, probably be surprising to too many listeners.

JC: Awesome. And kind of taking a deeper dive, I guess, into the thematic space around ProShares. I know that you guys have I believe, eight total Thematic ETFs. And you correct me if I'm mistaken on that. But I see that you guys offer kind of a wide variety grouping of ETFs, I saw one with the ticker name PAWZ, PAWZ a Petcare ETF, which I think could be a little bit interesting to discuss and also the decline of retail store ETF EMTY, which is quite the clever ticker name EMTY.

But, of all the Thematic that ProShares provides, would you be able to discuss a couple doesn't have to be those two, but just in general, a little bit of discussion around some of the Thematic ETFs that you guys are seeing have the best traction in terms of perhaps investor flows, feedback from the investment community, a little bit of details around some of those ETFs holdings, key weightings, things of that nature?

SH: Sure thing. So, the largest one that we have in market right now is ONON, which is focused on e-commerce. And we saw interest in that accelerates significantly during the pandemic. And interestingly enough, there is a lot of secular tailwind to e-commerce and the on-demand economy, I think we all see that, we all live it in our everyday lives.

We saw for example, it took a decade from about 2009 to 2019 for e-commerce to go from about 5% of total U.S. retail to 11%. And then during the pandemic in a matter of months, it reached a peak of 17% and has now settled back to about 15% of total retail. But nonetheless, what we see is that we accelerated the process of adoption of e-commerce, what took a decade into a matter of months.

And there were a number of factors around that there was the store closures. There was the quarantines during that period, we actually saw e-commerce take off among baby boomers, Washington Post reported on that, that they became the fastest growing segment of new users of e-commerce. We also saw ecommerce in areas that perhaps it wasn't popular, that were more fringe like grocery delivery become a lot more common.

And so, here we are sitting at 15% or 16% of total retail. We think that there's a much longer, you know, runway to go. So, e-commerce was one that really took off. And then we saw something else happened too that it wasn't just the secular growth of the theme. It was also around the idea that there were parts of the economy people didn't want to own. For example, consumer discretionary.

It is more than 30% e-commerce. But the next three largest segments are hotels, restaurants, hospitality, specialty retail, and automobiles. So now think of being an allocator, during the pandemic, where you look around, people are not staying in hotels or not going out to restaurants, either there's forced closures or there's just people opting not to be in that environment. You've also and that's an area that could take many years to recover because we know business travel makes up a significant portion.

And while a lot of us do look forward to getting back on the road and working with clients, it'll probably take some time to accomplish that and the airlines have talked about a multiyear ramp up to bring that business back. If we look at specialty retail, obviously brick and mortar closures hit an all-time record during the campaign. Bankruptcies, a number of high-level bankruptcies were also announced.

And then automobiles. I think at the outset, people imagined that it wasn't going to be here for big ticket purchases, automobiles didn't do great. They bucked the trend a little bit, because people did not want to take public transport. But nonetheless, those three sectors make up more than 50% of consumer discretionary.

So, the question that we found investors asking is, why am I going to own consumer discretionary the traditional sector, when more than 50% is going to be determined by industries that seem obviously impaired and could be impaired for a long time? And, within that if you look at the performance or the sales growth of consumer within consumer discretionary, and compare it to e-commerce, e-commerce sales grew over the last decade seven times faster than the rest of the consumer discretionary sector.

And it did so with the second best margins of all the industry groups in the sector. And that's one other aspect that we think is really important, is we built ONON around digital natives. So think of the Amazons the world, the Chewies, the HCs. While Walmart might be the second largest e-commerce company, they still have this massive brick and mortar infrastructure, that they need to figure out how to best leverage in this increasingly digital world.

And quite frankly, we don't think anybody has solved that puzzle yet. And so, we have a very specific focus on the digital natives, because they're the ones with the business models that were built for this. And over time, we've seen that traditional retail margins have contracted while the e-commerce companies can do well. Meanwhile, we've got sort of two other versions of retail disruption, if you will, or flavors, you mentioned the EMTY. So EMTY, effectively a short on brick-and-mortar retail.

And then we combine,

JL: I'm sorry, when you say a short on, I’ll just to jump in here, are you actually shorting the underlying names? Or how are you achieving that short exposure?

SH: Well, ProShares has expertise in levered and inverse, and without kind of giving away the secret sauce…

JL: So, it's like swaps are something, is that the,

SH: We've got an entire portfolio in capital markets team that lives and breathes how we achieve this. So that's in line with how that operates.

JL: Got you. So, like a daily reset at the end of the day that sort of setup. Do people need to be worried about compounding here?

SH: Well, look, there's anytime you're going to take on a short position, you want to be watching it closely, right. There's inherent risks to being short. We -- ProShares has experienced being able to structure appropriately in these types of investments. So, the third flavor actually combines them into clicks, which is a long-short implementation where you are long the digital native ONON basket, you're short at a 30% rate, the traditional brick and mortar names.

And so, that's a little bit of a creative approach to really playing not just the growth of e-commerce, but the e-commerce digital disruption across the board.

JC: Excellent. So, it's just a great opportunity for investors and market participants to isolate specific segments of the market that they're looking for without having the excess noise of other aspects, like you mentioned, within the consumer discretionary, or therefore any specific sector that the Thematic ETF will be built around. So, it definitely will allow for an investor to get what they want versus what they want and some additional to it.

SH: That's spot on. We take a pretty pure play approach and try and really concentrate the portfolio so that we're not necessarily or we try and avoid, quite frankly, picking up a lot of the large cap exposure that, tech names that if it's appropriate, we will certainly have it in if it's appropriate based on the theme. But, we're not we're not trying to deliver a replication of what other people already have in their portfolio, or what's out there. We're really trying to be unique around these thematic ideas.

JC: Awesome. So, I guess, how would you say, or I guess the best way to approach the question would be how important is Thematic Investing to the growth of ProShares ETF business without giving away the farm? Are there any sort of themes that you guys are looking at such as there can be potential future product launches or building research around?

SH: Well, probably the best way I can answer that is by providing a flavor of what we just launched, I guess late last year with the transformational changes, ETF. So that's ANEW, where we were very focused on what lasting changes we might see on the back of the pandemic. And so there were four that we identified. And this should give you a sense of the way we're thinking about the world, and perhaps what could be coming down the pipe.

But the four are the future of work, which for us, it was very important to distinguish that from work from home, which we think is a sub component. We do think that, we're probably looking at some sort of hybrid work environment, there's probably not a one size fits all whether people are permanently home or permanently in the office.

But even beyond that, we need to be thinking about, for example, integrating automation, right, physical automation. Robotics, how being at home or being hybrid impacts our need for cybersecurity services, how it impacts our productivity tools? So much broader than just the Zoom sort of at home, but really, what is the future of people in the workforce? What are the tools that are going to be available to them? So, everything from [0:21:48] collaborative robotics to the cloud services.

A second theme was around genomics and telehealth, where we saw people at record numbers using telehealth services, far more efficient, not having to drive yourself to the doctor, if you don't need tests, begs the question, why would any of us during flu season, go sit in a doctor's waiting room if we don't have to, we saw telehealth reach numbers that it would have taken arguably years to make in terms of north of 60% of the population had actually tried to service.

And then you look at something like genomics, where the dominant vaccines in the market, right, the most used are based on Messenger RNA Technology. Normally, new technologies like that take 10 years from the time people start working with the FDA. But you have Moderna and beyond tech Pfizer approved, Moderna had started working with the FDA in 2017. And so, four years later, because of the pandemic, we're now administering the vaccine to over 100 million people that probably would have taken six or seven more years before it had gotten approval.

And this is technology that could potentially be applied to things like cancer treatment. A third area, probably not surprising, based on what I discussed, is the digital consumer. And so, this is now a little bit broader than just e-commerce. But thinking about all the services that have become ubiquitous be it streaming, gaming, that many people relied on during the pandemic. We saw gaming hours increased significantly; streaming subscribers increased significantly.

And while we are looking forward to getting back out in the world, and I look forward to taking my kids to an amusement park, hopefully this summer, if it's prudent, then that's great. But I think that there are a lot of these behaviors in markets that have really reached a critical mass, and that investors should be paying attention to. And then a fourth, which you don't hear as much about is Food Revolution.

And we saw challenges in the supply chain during the pandemic with beef sales, for example. So, it actually went up. The cost of moving beef through the supply chain, given all the closures that we saw it plants went up significantly, it was actually the highest increase the USDA had recorded. As a byproduct, in part, we saw alternative forms of protein, whether it's the beyond meats of the world, or the impossibles, alternative forms of protein actually tick up and people that perhaps might not have been as eager to try that were looking for substitutes against the backdrop of the pandemic.

And the larger story there is around demographics and the sheer number of people being born into the world, right. According to the World Bank, more than 150,000 new people were born into the world for something like the next 30 years, that's per day. So, there's a real need to change the way that we procure food, the amount of energy we can apply to it, the environmental issues. And so, we think that that's another one where the pandemic has really opened up a whole discussion on how this could be different over time.

So, just to give you a sense, those are the types of things that we're grappling with. It's funny, over the last number of months, there's been all this discussion about value versus growth in the economy and what you want to own. It’s quite frankly, that that distinction is eroding, if you will. I think people shouldn't be focused on value or growth. But what really comes next, with the economy and the example I could give just turning to Food Revolution, you're talking about an industry where there is increasingly autonomous tractors to improve yield and reduce burden on the land.

There is use of drones in order to identify potentially blotted cripes, so that you're only treating those that are sick, and therefore conserving your chemical use. There is use of artificial intelligence and big data algorithms to try and optimize where you're planting. And this is farming. So, I think this is the future that many of these thematic ideas, and technological innovations are going to impact industries and sectors that perhaps people aren't thinking about.

JC: Excellent. And I love the way that you kind of thoroughly explained each kind of different component as potential areas to focus and for investors to view. And I guess, because I think you can make the case or argument that Thematic Investing could almost go as far as the imagination can go. Some Thematic ETFs appear almost too niche. How do you draw the line between capturing a logical theme that investors might want exposure to versus creating a product that may be just too narrow focus and unlikely to resonate with individuals? Because it can go both ways. Or you can try and make that case?

SH: There's no silver bullet on that one. Certainly, trying to figure out how to deliver segments of the economy that we think are really compelling, but also that have a narrative that can be kind of understood in the market is always a line we're trying to walk. An interesting one there, you mentioned earlier is PAWZ. So PAWZ, which is the ProShares Pet care ETF. That's one where I think when we first launched it, there was this attitude of Oh, that's a cute idea.

Well, a few months ago, Morgan Stanley put out a 40-page report from their equity research shop that identified it as a multiple $100 billion a year business over the course of five or seven years. And we had seen this going on, people have been talking about increasing spend. There is increased talk of your pet as member of your family. And so, what's interesting is people think about pet care, their default is well food and supplies.

And that's an important part of the business. And that has been growing and will continue to grow. But more than 50% as of now of the ETFs market cap is actually in pet healthcare.

Jonathan Liss

Yes, it's going to say yeah, all the top holdings you've got Zoetis, IDEXX Laboratories, Dechra Pharmaceuticals, yeah totally.

SH: And I will tell you, we lost our family guinea pig a few months back. And while we did not pursue chemotherapy, we pursued some other attempts to get him well. We discussed the idea of doing guinea pig chemotherapy, people will say that they are likely to put the health of their pet above their own. There are also a large number of people that are willing to take out loans in order to treat their pet and pet healthcare.

So, you get the benefits of being a consumer staple where you're -- whether it's food or whether it's sort of a chronic medicine need or vitamins, where you're getting that constant purchase. You've got benefits of healthcare where there's a technology aspect. And there you don't have to deal with Medicaid or Medicare right. There's no government intervention for healthcare and pets.

And then you've also got this sort of high growth tailwind behind it, that makes it kind of an elite consumer discretionary type of activity. So, it's one where it seems like it's niche. But really, there's a whole series of powerful narratives and an increasingly large market that go behind it. So, there is no magic bullet, we've seen some niche ETFs in the market do very, very well. In other cases, there's been, people have preferred kind of broad exposure.

I think a little bit depends on what people are using their Thematic ETFs for. And so, for a long time, we talked about the core satellite approach, where you had your core allocation, and you would add something like a pet care, or maybe some e-commerce, something like that into a portfolio as a satellite to try and get a little bit more growth, something a little bit more niche.

And I really think over the last couple of years, we've seen themes gravitate more into the core of the portfolio, where somebody might say, Okay, well, your transformational change index has 140 stocks, it covers four areas that I think are very high growth. And so, maybe instead of owning the Russell 1000 growth as my growth sleeve, I want to own something that's got a little bit more of a Thematic band, rather than say, just growth writ large.

Alternatively, you've had people as I talked about before, move consumer discretionary out and e-commerce into a core as almost like a modified, more tailored sector allocation. So again, it really depends on investment objectives, it depends on how people want to structure, but it is something we are always debating Jason as to how niche we want to be and ensuring that the market is big enough to really allow for growth.

JC: Excellent. Thank you for that.

JL: Yeah, very, very interesting. So, Scott, you touched on this a bit in your last answer, but I'm just curious, in terms of where you see Thematic Investing fitting into an investor's portfolio, the old core versus satellite conversation, you hear no shortage of people may be more inclined to the academic side of investing modern portfolio theory that will claim that there's really no evidence that Thematic or niche funds outperform over time, and that markets are inherently unpredictable enough, that you really just want to own as much of the market portfolio as possible.

I personally don't agree with that. I own several thematic funds, although they are satellite positions, and they're there to bolster holdings and things like the S&P 500, the Russell 2000. And just curious what your thought process is there, in terms of how much Thematic exposure is too much. When are you taking too big a gamble, even if something seems like a slam dunk in terms of where the world is heading?

SH: Yeah, I think that that's, again, it gets back to risk tolerances and what you're using them for, there's no hard and fast rule.

JL: Look, I don't think it's only about risk tolerance, though, it's also about expected returns to some extent. Is it not having a crystal ball to predict exactly which way the market is going to move over to?

SH: Well, absolutely, I was about to say, that's the other side of the coin. If your exposure to the thematics, right, is too small, then you're not going to move the needle. So, you want to be thinking about how much of your portfolio you need to allocate to actually make a difference. And feel like it's, it's worth having. And so, that could be a little bit more. So, it might not be that 5%, it might be 15% to 20%.

But then again, it depends because you wanted to create a core portfolio out of thematic ideas, you could do that too, at which point it would be much higher. A number of years ago, I looked at failed themes, and you can go back there's a lot of them for profit education before the financial crisis. Japanese real estate is another, REIT solar into the late 1990s and early 2000s before China really turned-on production and massively really adversely impacted that market, in terms of supply demand dynamics.

So, that's why I think some of these academic efforts to look back at themes are capturing kind of the early iterations. When I think we were not quite as good at identifying some of these long-term areas of opportunity, and that they were very tactical and orientation. And so, we really try and think about, what the long term is three years, five years, seven years down the line, where the growth opportunity is, and really what offers secular change to the global economy. Right.

Where are we seeing those structural changes, and trying to avoid those that are cyclical. I think is very important. We constantly throughout boom-and-bust cycles, this is, it's been a short one. But this is now the third that I've kind of lived through in my career. And we can constantly talk ourselves into the idea that cyclical performance is being driven by secular features. Right. So, things that are doing well at a certain part of the economic cycle are just going to continue to do well.

And sometimes you're not always going to get that right. And sometimes you want to look back at history, I think there were a lot of people that really questioned whether cloud computing was going to be secular cyclical in the next downturn? And in fact, we saw that given the nature of the pandemic and the recession, it proved tremendously resilient. It was one of the fastest growing areas, along with e-commerce.

And so, there were some of these stocks that seemed frothy, and that the people were concerned about, and they actually turned out to be the most recession proof part of the market. So, we don't have a crystal ball, we can't forecast. But we can try and hold ourselves to some of these rules to avoid missteps of the past.

JL: Sure. Yeah. That's well played. And I just want to, I guess, disclose that I am long eBiz, which is the global ex-ecommerce ETF, similar to some of the products you offer different, obviously, but again, certainly, it's the kind of theme where if you walk into a mall or you walk down main street, you just don't see a lot of business anymore. And you look at the digital or online equivalents. And it just feels like how could this not deliver outperformance versus just a market cap weighted portfolio of everything the good, the bad, and the everything in between along with it. So, I think it's a really salient point you're making here.

JC: So, Scott kind of looking into the aspect of what the future holds for the thematic space. I know that as ProShares is looking to identify new areas, you're looking at that three-year, five-year future outlooks. What do you see is the future for thematics as a whole, not necessarily just for ProShares, but as a growing area within the market where some individuals might say it’s trend base, others might say, no, this is going to be kind of part of the way investors will always look at the market? Where do you think Thematic fits in long term?

SH: So, even within a short period of time here, and we touched on this a little bit earlier, in terms of the Index Technologies, but we've seen a proliferation of Thematic strategies. Everything from new economy funds that have 450 stocks to very niche, actively managed 20 or 30 stock portfolios. So, I think we're going to continue to see thematics experiment with different approaches to come to market. So not just the themes, right, the ideas or the baskets of companies, but the way that Thematic has implemented.

And again, it might be active, it might be an active index approach. It might be a straight index approach, it might be in the case of clicks, along short. So, I think we're at the tip of the iceberg. And there's going to be an experimentation process, and a discovery process that we go to go through as new products hit the market.

If you look at Thematic as a percentage of total of equity ETF investing, it's still very small. It's been one of the fastest growing segments, but overall, it's still only a few percentage points of the total equity market. And so, I think if the Thematic Investing shops can continue to be creative and identify new segments of the economy that'll draw people in. I don't -- it's hard to know what that upper bound is going to be now.

But I think that there are a number of elements that really point towards the growth of Thematic Investing. I think it's, whether I talked about the disintegration of value versus growth, where, by the way, the Russell 1000 value now has north of 850 stocks in it, which means, right, more than 85% of the Russell 1000 is actually in the Russell 1000 value, which includes things like Activision and Electronic Arts video gaming companies, that we generally think of is more growth oriented.

So that's the kind of example where your standard demarcation is kind of less powerful than it was, right. Similarly, we've got a blending of technologies where Microsoft buys Nuance Communications, which is focused on natural language processing and healthcare. And so, is it because Microsoft wants the algorithm? Or do they want to be in healthcare? Or alternatively, look at somebody like Google, who's using deep mind, and actually making some probably important inventions or innovations on the genetic side, doing reading of genomic code.

So really, across the board, we see these technologies blending between different businesses, whether it's 3D printing in aerospace, but there are a number of them. And so, I think as those lines break down, people are going to say to themselves that thematics are a natural way to balance against that, and to continue to target certain aspects of the economy that they want.

JC: Yeah, absolutely. And I guess also, with the idea with technology ever changing by the day, who's to say that in the next X amount of years, there's going to be a new kind of division, an area where there's going to be exposure that is wanted. So, there's always you can say, crafting a way towards what's next.

And I think we could obviously talk about this all day long. But I know that we are kind of coming a little bit to the wrap up. I just also wanted to ask you, where investors and market participants would be able to go to find some more information about yourself, ProShares, Thematic Investing online social media, things of that nature, if you'd be able to share with our audience.

SH: Yes, so www.proshares.com. And that offers a gateway to look at the range of thematics as well as the wider range of offerings that ProShares has in the market. And we actually look forward to launching -- we've already got some thematic research out there. We just released a piece on consumer discretionary and sector investing, which we discussed a little bit earlier. But we are in the process of consolidating our thematic research and creating a little hub for ourselves in that space as well. So proshares.com and the individual information is there.

JC: Excellent. Well, that's going to wrap up this episode for us. We want to thank both Jonathan Liss for joining us and our guest today Scott Helfstein, Executive Director of Thematic Investing at ProShares for our detailed discussion around the thematic space. But again, thanks to our audience for listening and until next time, your host Jason Capul signing off.

For disclosure purposes, Scott Helfstein is long MSCI Transformational Changes ETF ticker ANEW. Jonathan Liss is not long any of the ETFs discussed. Jason Capul is not long any of the ETFs discussed.

This article was written by

Lets Talk ETFs profile picture
Let’s Talk ETFs is Seeking Alpha's podcast dedicated to the exchange traded fund space. Hosted by Seeking Alpha’s ETF expert, Jonathan Liss, the podcast features long-form conversations with industry insiders, ETF issuers, asset managers and investment advisers to explore the ways in which ETFs continue to evolve, helping investors to reach their financial goals.

Analyst’s Disclosure: I am/we are long ANEW. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

For disclosure purposes, Scott Helfstein is long MSCI Transformational Changes ETF ticker ANEW. Jonathan Liss is not long any of the ETFs discussed. Jason Capul is not long any of the ETFs discussed.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given that any particular security, portfolio, transaction or investment strategy is suitable for any specific person. The author is not advising you personally concerning the nature, potential, value or suitability of any particular security or other matter. You alone are solely responsible for determining whether any investment, security or strategy, or any product or service, is appropriate or suitable for you based on your investment objectives and personal and financial situation. The author is an employee of Seeking Alpha. Any views or opinions expressed herein may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank.

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