Pandemic Boosts Investor Appetite for Niche Funds

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Investors poured money at a record clip into funds that track buzzy themes hoping to profit on ways Covid-19 will upend the economy.

“Thematic” funds, which track trends such as cybersecurity, green energy and health technology, took in a record $42 billion in the U.S. and Europe in the first nine months of the year. That is more than in any previous full calendar year, according to Morningstar data.

There is no single definition of what makes a fund “thematic,” though generally they differ from traditional index ETFs and mutual funds by investing in stocks that cut across geographies and sectors. They go after companies that benefit from broad changes in society such as digitization, adoption of clean energy, or aging populations.

Some of the most popular among them were funds that concentrate on themes that have done well in the pandemic, especially digital businesses.

The actively managed ARK Innovation ETF has taken in more than $5 billion this year so far, and risen around 95%. FactSet data show. The fund invests in companies it believes will benefit from growth in fields including genomics and internet services. It holds stakes in genetic testing company Invitae Corp , workplace communications platform Slack Inc. and 2U Inc., a company that helps universities offer online degree programs.