Rosenbluth Talks Thematics & Options-Based ETFs on CNBC’s ETF Edge

TMX VettaFi Head of Research Todd Rosenbluth discussed thematic trends and active options-based ETFs on CNBC’s ETF Edge this week.Key Takeaways Thematic ETFs like the ROBO Global Artificial Intelligence ETF (THNQ) and the Range Nuclear Renaissance Index ETF (NUKZ) give investors precise exposure to specific investment themes. Thematic AI investments are becoming ever more granular. This precision allows advisors and investors to fine-tune their portfolios beyond broad technology sector exposure. Asset managers increasingly use options based ETFs like the NEOS Nasdaq 100 High Income ETF (QQQI) to deliver potential alpha in volatile markets. The Evolving Role of Thematic StrategiesInvestors are increasingly turning to thematic ETFs for targeted exposure to specific investment themes. Rosenbluth explained that AI has been core to many thematic strategies out there, whether they’re actively managed or index-based. He highlighted the Range Nuclear Renaissance Index ETF (NUKZ ) as an index-based product that offers thematic exposure to the nuclear energy sector. He also discussed increasing demand for the ROBO Global Artificial Intelligence ETF (THNQ B-) for its exposure to the AI sector, and explained how thematic AI exposure is becoming increasingly targeted. “We’ve seen even more narrow slices. So there are now photonics ETFs, and there is more to come,” said Rosenbluth. “We think that we’re going to continue to see the industry and advisors and investors adopt these products to complement the QQQs." The QQQ ETFs contain AI exposure, but also have "exposure to broader mega-cap growth stocks,” he added. As thematic exposure becomes increasingly narrow, Rosenbluth explained that S&P 500 and Nasdaq-100 based products will remain core to portfolios. However, investors are shifting how they overweight toward sector specific products in their portfolios. He noted that State Street is the leader within the sector suite of products. State Street uses thematic ETFs to gain more targeted sector-specific exposure. Funds such as the State Street Technology Select Sector SPDR ETF (XLK A) provide thematic exposure to the technology companies within the S&P 500, heavily weighted toward semiconductors, software, and tech hardware. “Artificial intelligence covers more than just the technology sector,” said Rosenbluth. “We’ve seen some advisors use that 5% overweight instead of going into the technology sector SPDR, they might be looking towards an artificial intelligence ETF as an alternative.”Delivering Alpha Through Options“What we’ve seen also, besides the active management on the stock selection side or the industry perspective, is using options," Rosenbluth explained. “We’ve seen a growing number of asset managers bring their options expertise to be able to deliver alpha.” See More: How Active Options ETFs Are Driving Outsized Returns | Todd Rosenbluth The options-based products can still offer broad exposure to the Nasdaq or the S&P 500, while offering additional income generation in exchange for capped upside. Rosenbluth brings up NEOS as a firm that has seen a lot of success this year with the NEOS Nasdaq 100 High Income ETF (QQQI A) and NEOS S&P 500 High Income ETF (SPYI A). These products provide monthly income using a data-driven call option strategy on the underlying index. Goldman Sachs is another firm that has seen success with options based ETFs, according to Rosenbluth. The Goldman Sachs Nasdaq-100 Premium Income ETF (GPIQ A) captures large-cap growth, while targeting high monthly income. This strategy provides exposure to the Nasdaq-100 index while generating income through a dynamic covered call option overlay. “We’ve even seen some of the more targeted more sector oriented products. So Amplify has a product (NDIV ) (the Amplify Energy & Natural Resources Covered Call ETF), which offers some options income on top of the energy and natural resources areas. The active management is more in the options part, as opposed to trying to time the market necessarily on the security selection,” Rosenbluth noted. For more news, information, and analysis, visit the Thematic Investing Content Hub. VettaFi LLC (“VettaFi”) is the index provider for NDIV, NUKZ, and THNQ for which it receives an index licensing fee. However, NDIV, NUKZ, and THNQ are not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of NDIV, NUKZ, and THNQ.