Thematic Investing: Conviction Alone Does Not Determine Asset Allocation
More than three-quarters of French investors say they don't know what thematic investing is. The problem isn't their lack of knowledge—it's that the available research on these products is far less favorable than the sales pitch.
A survey conducted by the Opinium Institute on behalf of the asset manager WisdomTree among 4,000 European investors—including 1,000 French investors with at least €5,000 in savings—reveals two key findings: 77% of French respondents say they are unfamiliar with thematic investing, and 60% believe they are unable to identify the themes that will outperform in the medium term. Artificial intelligence dominates the respondents’ views. It is worth noting that the sponsor is a provider of thematic ETFs, whose flagship product focuses on AI.
A theme is not a sector
A sector fund follows a standardized classification system common to the entire financial industry: “healthcare,” “technology.” A thematic fund follows a narrative that cuts across sectors. An “aging” fund will combine pharmaceuticals, healthcare real estate, insurance, and leisure.
There is no official classification system for themes; each index provider defines its own. MSCI breaks down a theme into sub-themes, generates keywords using natural language processing, analyzes companies’ annual reports, and assigns a relevance score. The selection threshold is 25%, which means a company is eligible even if three-quarters of its business has nothing to do with the theme. As a result, two ETFs with the same name may have fewer than half of their holdings in common. Be sure to check the key information document before buying.
What Fifteen Years of Data Reveals
Morningstar did the math. From mid-2009 to mid-2024, 69% of the thematic funds that initially existed in Europe had closed 15 years later. Among the survivors, only 17% outperformed a global equity index. Choosing a thematic fund at random in 2009 therefore gave you about a one-in-twenty chance of beating the broader market.
The mechanism, as documented by research, is even more interesting than the figure itself. In an article published in 2023 in the Review of Financial Studies, Itzhak Ben-David, Francesco Franzoni, Byungwook Kim, and Rabih Moussawi analyzed twenty years of U.S. ETFs. During their first five years, specialized ETFs lose about 30% in risk-adjusted returns.
Costs have nothing to do with it, as the authors demonstrate. The cause lies in the launch timing: issuers create these products when the stocks in the theme are already overvalued. In the two years leading up to the launch, the underlying companies have a price-to-revenue ratio of 28.8, compared to 9.3 for broad-market ETFs. Analysts’ growth forecasts reverse once the fund is launched.
The launch timeline confirms this pattern: 167 thematic funds worldwide in 2019, 589 in 2021, with nearly half of U.S. launches occurring in the fourth quarter of 2021 alone, just before the 2022 market correction. The cycle begins anew. After two years of outflows, European thematic ETFs attracted $16.66 billion in 2025, followed by $13.31 billion in the first half of 2026 alone.
The Cost of Thematic ETFs
According to ESMA, an equity ETF cost an average of 0.21% per year in Europe in 2024, compared with 1.28% for an actively managed equity fund. A thematic ETF falls somewhere in between, with recent products typically charging 0.50% to 0.70%—three to five times the cost of a global ETF. Moreover, inflows into specialized ETFs are not driven by fee levels, whereas they are a factor for broad-market ETFs: buyers of thematic ETFs do not focus on price. These products accounted for 18% of assets under management but 36% of fee revenue.
The Technical Catch with the PEA
The PEA only accepts funds that are at least 75% invested in European stocks. However, the high-growth sectors—AI, semiconductors, and cybersecurity—are dominated by U.S. and Asian stocks. Fund managers circumvent this restriction through synthetic replication: the fund holds a basket of European stocks and swaps its performance for that of the global thematic index via a contract with a bank. Your “PEA-eligible AI” ETF therefore does not actually hold the stocks in that sector, and you are exposed to counterparty risk.
A Product That Has Become a Banking Offering
1.109 million French people made at least one ETF transaction in 2025—an 83% increase in one year—with an average age of 38. This AMF statistic is worth noting before visiting a branch. Its 2025–2026 mystery shopping campaign, conducted at eleven retail banks, shows that ETFs were offered in 48% of appointments. However, the fees associated with the recommended instruments were mentioned in fewer than one in three interviews, and the key information document was provided in only 9% of cases to conservative investors. Yet that is where the index composition is listed.
