Thematic investing appeals not just to retail investors but to financial advisers and institutions as well, said Jay Jacobs, U.S. head of thematics and active equity ETFs at BlackRock, during an event in New York on Tuesday.
"I think the appeal of thematic investing is that it is understandable by anyone," Mr. Jacobs said in comments during the third annual ETFGI Global ETFs Insights Summit-United States, adding when he talks with friends who may not be investors, they "get it" when it comes to themes such as electric vehicles, he said.
"But also, financial advisers and institutions want these exposures, too," Mr. Jacobs said.
For example, BlackRock sees institutions with long time horizons "that want to kind of hedge out their exposures," he said.
"If you're a pension fund for an oil company, you might want a little bit of clean-energy exposure to really kind of hedge out the direction of travel of your industry," Mr. Jacobs said. "So, there's absolutely institutional applications."
Asked about his outlook for 2023, Mr. Jacobs said BlackRock expects it to be different from recent years when there wasn't much dispersion among growth stocks.
Back in 2020 and 2021, "really growth worked across the board, it didn't matter if you were buying tech, large-cap growth, moonshot technologies, different ways you sliced and diced growth generally worked very well for portfolios," he said.
The reverse has been true in 2022, Mr. Jacobs said.
"Growth generally did not do well, and there wasn't a lot of dispersion between companies within the growth segment," he said. "It really became kind of an asset allocator's question of 'how much do I want to ramp up growth exposure, or how much do I want to dial it down.'"
Next year is likely to be different, he said.
"In this environment, where we have persistently high inflation, and we have (the) chance of an economic recession, we don't think it's going to look like 2020, 2021 or 2022," Mr. Jacobs said. "That tight trading of all growth stocks together is not likely to be the case."
One area Mr. Jacobs cited was cybersecurity. While there have been layoffs at major technology companies and businesses have been cutting back on expenses such as travel, one of the areas where they aren't reducing costs is cybersecurity, he said.
"It's just not discretionary anymore," Mr. Jacobs said, adding that it's a "must have" for both companies and governments to protect themselves in this digital world. "So, we see that as almost a tech staple."