From low fees to diversification, there are more than enough reasons to love the humble exchange traded fund (ETF). While often used as core, long-term holdings, they can also be quick and easy to trade. That explains why investors sometimes use them to establish tactical positions in response to events.
I’d argue we’ve seen some of that behaviour in recent weeks. This year’s developments have pushed commodities back into the spotlight, and gold appears to have regained its safe-haven status. A look at fund flow data from Morningstar shows gold ETFs have pulled in investor cash: iShares Physical Gold ETC (SGLN), for one, took in a net €454mn (£382m) in February. Names like WisdomTree Enhanced Commodity UCITS ETF (WCOG) were also popular, and such funds have performed well lately. iShares Physical Gold ETC generated a return of 12.3 per cent in the month to 11 March, with WisdomTree Enhanced Commodity UCITS ETF enjoying a gain of nearly 17 per cent.
With the Ukrainian crisis providing another reason to back renewables, clean energy funds are also riding a wave. iShares Global Clean Energy UCITS ETF (INRG), a poster child for both the thematics space and its pitfalls, made a return of nearly 20 per cent over the same one-month period, with rival clean energy ETFs also enjoying strong performances. While it’s not so obvious from their performance figures, thematic ETFs in areas such as cybersecurity could also look interesting on the back of recent events.