Meme stocks may have lost some momentum, but individual investors are still increasingly taking charge of their own portfolios. For instance, thematic ETFs saw their net assets under management increase by +14.6% from $75.5 billion at the end of 2022. And new funds continue to pop up targeting niche corners of the market that might appeal to specific groups of investors.
In this article, we’ll look at three newly launched ETFs targeting these kinds of niche opportunities, in cryptocurrencies, batteries and small-cap value themes, and why you might want to consider them for your portfolio.
ZZZ: A Crypto-Inclusive Index Fund
Bitcoin’s meteoric rise from $20,880 to nearly $48,000 over the past year and the approval of the first spot Bitcoin ETFs have rekindled investor interest in cryptocurrencies. While plenty of funds already offer access to Bitcoin and other crypto assets, few offer all-in-one exposure to a regularly rebalanced portfolio of both stocks and cryptocurrencies.
The Cyber Hornet S&P 500® and Bitcoin 75/25 Strategy ETF (ZZZ) combine broad market exposure with Bitcoin futures to provide blended exposure to both asset classes. Unlike other crypto funds, it offers monthly rebalancing to ensure that asset allocations remain 75/25 over time.
While it’s no surprise that adding bitcoin to a historical portfolio helped boost returns – thanks to bitcoin’s meteoric rise, there are also potential diversification benefits to holding cryptocurrencies. Bitcoin’s correlation to U.S. stock markets has been low, as of late 2023, suggesting that the digital asset could help even out returns.
Other Crypto Funds
These ETFs are sorted by their 1-year total return, which range from 80% to 117%. They have AUM between $4M and $75M and expenses between 0.61% and 0.85%. They are currently yielding between % and %.
| Name | Ticker | Type | Active? | AUM | 1-year Ret (%) | Expense | Yield |
|---|---|---|---|---|---|---|---|
| Invesco Alerian Galaxy Crypto Economy ETF | SATO | ETF | No | $4.21M | 116.8% | 0.61% | 2.21% |
| Global X Blockchain & Bitcoin Strategy ETF | BITS | ETF | Yes | $11.5M | 114.7% | 0.65% | 13.68% |
| Bitwise Crypto Industry Innovators ETF | BITQ | ETF | No | $74.1M | 88.9% | 0.85% | 1.51% |
| Valkyrie Bitcoin Miners ETF | WGMI | ETF | Yes | $13.8M | 80.1% | 0.75% | 0.31% |
EV: A Battery Production & Recycling Play
The $104 billion global battery market is projected to grow at a 15.8% rate between 2023 and 2030, with the lithium-ion segment accounting for 40.77% of revenue share in 2022. In addition to the growth in electric vehicles, the battery market could realize a significant boost from grid storage requirements as solar, wind and other renewables become more popular.
The Mast Global Battery Recycling & Production ETF (EV) provides exposure to growth and innovation in the battery recycling, battery raw materials and battery manufacturing sectors. With a portfolio of ten companies, the fund provides concentrated exposure to everything from raw material producers, like Vale, to chemical manufacturers, like LG Chemical.
While battery demand is projected to rise over the long term, short-term fluctuations in supply and demand mean batteries are best kept as just a small part of an otherwise diversified portfolio. For example, electric vehicle demand has shown signs of slowing down in recent quarters, while less demand for batteries has taken a toll on global lithium prices.
Other Battery Funds
These ETFs are sorted by their 1-year total return, which range from -31% to 21%. They have AUM between $129M and $3.2B and expenses between 0.41% and 0.75%. They are currently yielding between 0% and 3.21%.
| Name | Ticker | Type | Active? | AUM | 1-year Ret (%) | Expense | Yield |
|---|---|---|---|---|---|---|---|
| ARK Autonomous Technology & Robotics ETF | ARKQ | ETF | Yes | $1.01B | 21.1% | 0.75% | 0% |
| Amplify Lithium & Battery Technology ETF | BATT | ETF | No | $129M | -24% | 0.59% | 3.21% |
| Global X Lithium & Battery Tech ETF | LIT | ETF | No | $2.61B | -26.6% | 0.75% | 1.1% |
| iShares Global Clean Energy ETF | ICLN | ETF | No | $3.14B | -30.5% | 0.41% | 1.58% |
SFLO: A Unique Take on Small-Cap Value
Many funds invest in small-cap value stocks, including well-known names like the Vanguard Small Cap Value Fund (VBR) and the Avantis U.S. Small Cap ETF (AVUV). But these funds typically take a high-level approach to valuation, looking at factors like price-earnings ratios, price-book ratios and growth, rather than digging deeper.
The VictoryShares Small Cap Free Cash Flow ETF (SFLO) offers a unique spin on the small-cap value theme by taking a deeper fundamental approach to stock selection. In particular, the managers screen for profitable companies, choose the 300 with the highest free cash flow yields, eliminate 100 companies with low growth scores and weight the result by free cash flow.
Currently, the fund’s portfolio of around 200 stocks is heavily weighted toward energy (26.97%) and consumer discretionary (20.22%) with an average market cap of $3.5 billion and price-earnings ratio of 9.47×. The largest holdings include companies like Globus Medical Inc. (1.41%), Scorpio Tankers Inc. (1.33%) and SPX Technologies Inc. (1.31%).
Other Small-Cap Value Funds
These ETFs are sorted by their 1-year total return, which range from 5.9% to 10.7%. They have AUM between $28M and $6.8B and expenses between 0.25% and 0.80%. They are currently yielding between 1.1% and 1.7%.
| Name | Ticker | Type | Active? | AUM | 1-year Ret (%) | Expense | Yield |
|---|---|---|---|---|---|---|---|
| Avantis U.S. Small Cap Value ETF | AVUV | ETF | Yes | $6.76B | 10.7% | 0.25% | 1.66% |
| First Trust Small Cap Value AlphaDEX Fund | FYT | ETF | No | $157M | 8.7% | 0.7% | 1.5% |
| Roundhill Acquirers Deep Value ETF | DEEP | ETF | No | $38.1M | 7.7% | 0.8% | 1.68% |
| Invesco S&P SmallCap 600 Pure Value ETF | RZV | ETF | No | $231M | 5.9% | 0.35% | 1.13% |
The Bottom Line
Individual investors remain a wrecking force in today’s market, driving demand for new thematic ETFs. The three funds we’ve covered in this article underscore the growing diversity of these funds and may warrant a second look for investors interested in these themes.