On CNBC’s “ETF Edge,” Todd Rosenbluth, head of research at VettaFi, outlined how thematic and options‑based exchange‑traded funds are shaping investment strategies.
Growing Interest in Narrow‑Theme Funds
Rosenbluth said investors are gravitating toward ETFs that focus on specific trends rather than broad sector exposure. He cited the ROBO Global Artificial Intelligence ETF (THNQ) and the Range Nuclear Renaissance Index ETF (NUKZ) as examples that give precise exposure to artificial intelligence and nuclear energy, respectively. “We’ve seen even more narrow slices. So there are now photonics ETFs, and there is more to come,” he remarked, indicating a trend toward increasingly specialized offerings.
While traditional large‑cap funds tied to the S&P 500 and Nasdaq‑100 remain core holdings, advisors are reallocating a modest portion of portfolios to these niche funds. State Street leads the market with sector‑focused ETFs such as the Technology Select Sector SPDR (XLK), which concentrates on semiconductor, software, and hardware firms within the broader index. Some advisors, according to the analyst, are opting for a 5 % tilt toward an AI‑focused fund instead of the broader technology SPDR, seeing artificial intelligence as a theme that stretches beyond pure tech stocks.
The move toward tighter thematic exposure reflects a desire for granularity. By targeting a single industry or emerging technology, investors can fine‑tune risk and return expectations without the dilution that comes from larger, diversified funds. Demand for such precision appears to be accelerating, with new thematic products emerging regularly.
Related: Wall Street Invests in Crypto Infrastructure
Options‑Based ETFs Aim to Add Income
Rosenbluth also highlighted the role of options in generating additional returns. Asset managers are leveraging options expertise to offer ETFs that provide monthly income while capping upside potential. The NEOS Nasdaq 100 High Income ETF (QQQI) and the NEOS S&P 500 High Income ETF (SPYI) employ a data‑driven call‑option strategy that overlays the underlying index, delivering regular cash flow.
Goldman Sachs’ Nasdaq‑100 Premium Income ETF (GPIQ) follows a similar model, using a dynamic covered‑call approach to target high monthly yields while maintaining exposure to large‑cap growth stocks. Amplify’s Energy & Natural Resources Covered Call ETF (NDIV) applies the same technique to the energy sector, emphasizing that the active component of these products lies in the options overlay rather than in security selection.
Such structures allow investors to retain broad market exposure—whether to the Nasdaq or the S&P 500—while receiving income that can help offset volatility. The trade‑off is a limited upside, as the call‑option component caps potential gains if the underlying index rallies sharply.
Potential Paths Forward
Looking ahead, advisors may blend thematic focus with income‑generating overlays to meet client objectives.
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