Although there has been a recent shift away from mega-cap technology stocks, it may still make sense to invest in thematic technology exchange-traded funds.
Roundhill Investments runs the Roundhill Generative AI & Technology ETF (CHAT), which is up 13.8% since Friday's close. But despite recent volatility in the group, the company's CEO Dave Mazza believes the investment thesis is still intact.
“These names are still performing well,” he told CNBC's “ETF Edge” this week. “Obviously we saw a wobble in July and August. If you look at the last month, the performance has been generally in line with the market.”
The fund gained 2.1% last month, just above the S&P500During the same period, the increase was 3.5%.
His three largest positions are Nvidia, Microsoft and Alphabet, according to FactSet, but he has 52 holdings overall. Mazza pointed to some of CHAT's under-the-radar artificial intelligence stocks and dismissed concerns that thematic ETFs may be too narrowly focused.
“There are companies like Dell in the portfolio and others, ServiceNow And Salesforceuse and integrate AI,” he said.
“The right tools for the right job”
Meanwhile, financial futurist Dave Nadig says thematic ETFs may have a narrower scope and are more suitable for traders than long-term investors.
“It's about having the right tools for the right job,” Nadig said in the same interview. “The average holding period on topics is weeks, not years, so people use them as a means of expressing short-term opinions.”
Still, funds like Roundhill's can be relatively expensive. The actively managed CHAT ETF has a management fee of 0.75%.
Nadig further said that the higher fees for thematic funds could be worth the price.
“Because this is a rapidly evolving technology, it makes a lot of sense to have an active manager overlay on it,” he added.
Mazza of Roundhill also sees the benefits of an active approach.
“For investors who either want to do more or have the potential to do better – and that's not guaranteed in any one theme – it's worth paying for either credible active management or a means of determining a specific outcome in that area,” Mazza said. “When I look at it from that perspective, many thematic ETFs are actually cheaper than traditional active management and mutual fund forms.”
Disclaimer
Comments are closed.