Thematic funds and ETFs have experienced a volatile journey since 2021. Assets under management surged from just over EUR 300 billion in early 2021 to a peak of more than EUR 440 billion by late 2021, reflecting strong investor enthusiasm for long-term structural growth themes. However, rising interest rates, weaker performance across many popular themes, and changing market leadership led to a prolonged period of asset contraction and stagnation between 2022 and 2025.
More recently, the segment has shown signs of renewed momentum. Total assets under management climbed to EUR 403 billion in May, their highest level in several years. While still below the record highs reached in 2021, the sharp rebound suggests that investor appetite for thematic investing may be recovering, supported by growing interest in areas such as artificial intelligence, defense, cybersecurity, and energy transition.
What Are Thematic Funds?
A thematic fund is a fund or ETF that selects its holdings based on exposure to investment themes. These strategies aim to capture long-term structural growth trends that often transcend the traditional business cycle, such as multidecade shifts like technological advances, environmental changes, or evolving consumer behaviors.
Unlike funds that focus on specific regions or company sizes, thematic funds build portfolios around narratives. These include everything from robotics and cybersecurity to renewable energy and the future of healthcare.
The core idea is to invest in companies poised to benefit from these transformative changes, regardless of their sector classification. This approach allows asset managers to offer products that align with investors’ investment goals.
Morningstar arranges the thematic fund universe into four broad buckets: technology, physical world, social, and broad thematic.
- Technology themes target the disruptive growth potential of technological change. These include themes like fintech, robotics & automation, and battery technology.
- Physical world themes address the management of physical resources. Included in this bucket are funds that facilitate the transition to a low-carbon world, such as alternative energy funds.
- Themes in the social bucket deal with structural changes in society. These themes may be politically oriented or focus on demographic changes.
- Those funds that track multiple themes belonging to any of the above buckets are grouped under the broad thematic umbrella.
The Best Thematic Funds and ETFs to Buy
To find the best thematic funds and ETFs to buy, we screened for the oldest share classes earning a Morningstar Medalist Rating of Gold. All data is as of June 16. There are currently 748 thematic mutual funds and 220 thematic ETFs in Morningstar’s database. Only 20 of these products have earned a Medalist Rating of Gold.
Because the screen was created with the oldest share class for each fund, some may be listed with share classes that are not accessible to individual investors, or they may be aimed at institutional investors and require large minimum investments. The individual investor versions of those funds may carry higher fees, reducing returns to shareholders. Medalist Ratings may differ among the share classes of a fund.
Broad Theme: Technology
Technology-themed funds invest in companies exposed to innovations such as artificial intelligence, robotics, cybersecurity, semiconductors, and digital infrastructure.
Broad Theme: Social
Social thematic funds focus on long-term demographic and societal trends, including healthcare innovation, aging populations, and changing consumer behavior.
Broad Theme: Physical World
Physical world funds invest in companies linked to the management of natural resources, infrastructure, and the transition to a lower-carbon economy.
Broad Theme: Broad Thematic
Broad thematic funds combine several long-term investment themes within a single portfolio, providing exposure to multiple structural growth trends.
