Thematic ETFs surged in 2025, thanks in part to AI investors

Thematic ETFs investing is growing in popularity with total assets under management (AUM) rising to $188 billion.

As part of this week's ETF Report, J.P. Morgan Asset Management Chief ETF Strategist Jon Maier joins Julie Hyman for a conversation on the rise of specific thematic ETFs, such as AI and robotics, and the emergence of actively managed ETFs, fixed-income funds, and 401(k) investing.

J.P. Morgan manages its own US Tech Leaders ETF (JTEK), Hedged Equity Laddered Overlay ETF (HELO), and Active Bond ETF (JBND).

To watch more expert insights and analysis on the latest market action, check out more Market Catalysts.

Video Transcript

00:00 Speaker A

Thematic ETFs are making a comeback with total assets under management growing from $89 billion in June to $118 billion in November. My next guest says a big contributor, of course, is the AI boom. Maybe not a surprise. Joining me now in studio is John Mayer, JP Morgan Asset Management Chief ETF strategist for this week's ETF Report brought to you by Invesco QQQ. Thanks for being here, John.

00:16 John Mayer

Thanks for having me.

00:17 Speaker A

So, thematic ETFs, like what has been the sort of waxing and waning of them over the past few years, I guess?

00:23 John Mayer

Yeah, you know, for a while, they were just certainly in vogue in different different areas like robotics and electric vehicles, but you've seen it a convergence on the theme into AI. And AI is really touching many different areas because AI really can impact robotics, uh, electric vehicles and things like that. So, at JP Morgan, we have an ETF that focuses on technology more broadly. Um, the ticker is JTech, J-T-E-K. And it focuses on adoption and enablement in technology, which could be broader than technology. It touches communication services, um, um, uh, uh, consumer discretionary.

01:03 Speaker A

You've got some healthcare in there, I think too. So, so I guess it's companies that are using AI no matter what, uh, sector they're in.

01:08 John Mayer

Yeah, the the AI and just technology in general, obviously, uh, improves efficiencies. And if you have a bottoms-up research team that focuses on different aspects of companies, valuation, earnings, um, we think that's the right way to approach to kind of look at a broad-based, uh segment of companies and how those companies are going to benefit, um, improvement in, you know, efficiencies.

01:28 Speaker A

Yeah, so it makes sense in in in that lens that, um, thematic ETFs are coming back, not just that one, but in general. Um, we've also seen this sort of growing boom in actively managed ETFs, which is a pretty big change for the industry, it feels like, sort of putting a strategy in an ETF wrapper. Um, it's still relatively small, but it has been growing a lot. What do you think has been driving that?

01:52 John Mayer

Well, the adoption of actively managed ETFs really started in 2019. Um, 85% of all ETFs that have been issued since, uh, this year have been actively managed. So there's about $1.3 trillion of actively managed ETFs. Um, so it's about 10, 12% of the overall marketplace, but it's been 35% of the flows this year.

02:08 Speaker A

Wow.

02:08 John Mayer

So I think what's happening is that a lot of these funds have three and five-year track records, are getting on platforms that investors are able to kind of take off the shelf. And the ETF structure has so many different benefits, um, just overall. Um, and that's really being realized by the end investor.

02:25 Speaker A

I I know it's a very diverse group, but do active ETFs perform better than passive ETFs?

02:30 John Mayer

Well, it really depends on the category, right?

02:32 Speaker A

Right. Yeah. I guess I'm I keep trying to lump them all together doesn't quite work.

02:36 John Mayer

So you have it's there's 4,500 different ETFs. For fixed income, for example. Fixed income is a category that historically in the ETF uh, wrapper has been passive. But overall, it's an active market. 70% of all assets in fixed income, uh, no matter what structure, have been active. Now, when you utilized inside the ETF structure and then add on the layer of active for most for the most part, most of our ETFs outperform the AGG. JBND for example, JBND, which is an intermediate core bond portfolio, um, has lower volatility than the AGG, has includes more sectors than the AGG, like the securitized market, and does better than the AGG. So why not choose an active manager?

03:11 Speaker A

Mm. Right.

03:12 John Mayer

There's like three and a half million individual securities in the fixed income area. It's very hard to parse through and decide which securities you should include in your own portfolio. Outsourcing that to somebody else, it's a great way to go.

03:25 Speaker A

What kind of adoption have we seen of ETFs within 401(k)s? Because that seems like it's sort of the final frontier, if you will.

03:31 John Mayer

Not much.

03:32 Speaker A

Yeah. Um, there's some regulatory reasons for that, right?

03:35 John Mayer

Yeah, there first of all, inside of if you think about, um, a regular money goes into um, 401(k) plans and things like that, most people don't trade their their 401(k) plan. Um, so there's not as much a reason, there um, to have uh, ETFs inside 401(k) plans, but there certainly are some 401(k) plans.

03:46 Speaker A

But you can save money in some cases, right? By having it in something in an ETF wrapper instead of a mutual fund wrapper, right?

03:51 John Mayer

Yeah, look, they're less expensive, more cost-effective. And you certain platforms do, um, but it's not there hasn't been broad based adoption yet. I think that will change over time because the ETF structure from our our perspective and from the market's perspective, it's just a better structure than the mutual fund structure.

04:06 Speaker A

Um, in your ETF world, as you look to 2026, what are you most excited about or what's the next innovation coming or what what are you looking for next year?

04:14 John Mayer

So I I expect to see more actively managed ETFs just like we have seen in the past. I expect to see, you know, in terms of diversification, as you build your portfolios, the ETF landscape is going to look more like the mutual fund landscape has looked. Um, large cap growth, large cap value, intermediate core, intermediate core bond plus, and derivative income. You're going to see more assets go into those categories because of the realization of the ETF structure being less expensive, as you mentioned. Um, and there's more benefits. The um, tax efficiency of ETFs, which certainly is a huge benefit, is probably the superpower of the ETF and has really driven adoption over time. So I think you're going to see assets more flow into those more traditional categories. It's already happening. It'll continue through 2026.

04:56 Speaker A

We've also seen a lot of non-traditional types of ETFs. I mean, we have single stock ETFs, we have a million leveraged ETFs now. Do you think that that is increasing risk in the system that we are seeing those more exotic instruments?

05:05 John Mayer

It's still relatively some of those those assets are still a relatively relatively small part portion of the overall marketplace. So I don't think it's going to add risk. It does add the account the count of ETFs. So often we hear that there's more ETFs than there are stocks. So what? There's more mutual funds than there are stocks. Um, and there are certain categories that um, folks who like meme stocks and things like that will play those categories. But for the more core traditional investor, they're going to stay the same, uh, invest in those modern, moderately aggressive type of portfolios, um have a diversified portfolio, and you have these great building blocks. And those building blocks are ETFs.

05:39 Speaker A

John, thanks for coming in.

05:40 John Mayer

Thanks for having me.

05:41 Speaker A

Appreciate it.

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