Goldman Channels Cathie Wood Playbook in Active Thematic ETF Bid

09 Apr 2021, 10:35 PM IST

(Bloomberg) -- One of Wall Street’s most storied names is joining the mania for actively managed thematic ETFs sparked by Cathie Wood.

Goldman Sachs Group Inc. plans to create the Future Consumer Equity exchange-traded fund, the bank said in a filing Thursday. It will focus on technology companies and firms that embrace the “lifestyle and values” of younger consumers such as sustainable living, health and wellness.

While this isn’t Goldman’s first foray into thematic investing, it does appear to be its first actively managed equity ETF. Theme-based products are a booming corner of the $6.1 trillion U.S. industry, with Wood’s Ark Investment Management inspiring copycat ETFs that eschew traditional sectors in favor of futuristic trends like space travel and robotics.

Goldman Channels Cathie Wood Playbook in Active Thematic ETF Bid

“Given the success of Ark in the past year, many asset managers are seeking to tap into growing investor demand for actively managed equity ETFs using in-house expertise,” said Todd Rosenbluth, director of ETF research for CFRA Research.

Even as retail traders look to be cooling toward the stock market, a recent survey shows that 80% of global ETF investors plan on increasing their exposure to thematic products this year.

Goldman’s proposed fund, which doesn’t have an expense ratio yet, will invest in companies that cater to the “evolving priorities and spending habits of younger consumers,” according to the filing. The prospectus warns that the ETF may invest more of its cash in fewer companies than a traditional diversified fund might.

The U.S. bank has struggled to hit on a winning thematic product in the past. In November, it combined five such ETFs that had failed to gain much traction into the Goldman Sachs Innovate Equity fund (ticker GINN), which has $457 million in assets.

Meanwhile, the theme of next-generation consumers is fairly well-established. Global X’s Millennial Consumer fund (MILN) has gathered $177 million in assets since its 2016 launch, for example.

Still, the New York-based bank has notched some ETF victories. The ActiveBeta U.S. Large Cap Equity fund (GSLC) -- a smart beta product that undercut the competition with its 9 basis point fee -- holds $12.6 billion.