Thematic funds are back on the menu

By Michael Morton
27th November 2025

Related topics: Morningstar, BlackRock, Thematic funds, Pictet Asset Management

Thematic investing has a habit of rising from the dead. Three years after a pandemic-era mania curdled into disappointment, global assets under management in thematic funds have climbed back to a three-year high of $779bn, according to Morningstar’s latest Global Thematic Fund Landscape.

That still leaves the sector 15% below its 2021 peak, but the direction of travel is clear. Investors, once again, are convinced that the future can be bought in neat, pre-packaged themes.

Morningstar’s latest report introduces a revamped taxonomy for sorting this expanding menagerie of funds, an effort akin to updating the Linnaean system for a rainforest that sprouts new species weekly. Themes today are broader, more numerous and more exotic. Managers have long packaged familiar stories (technology, healthcare, energy transition) but the recent boom has produced ever more finely sliced bets: pet care, space tourism, battery metals, or “smart everything.”

What are the hot new investment themes?

Two themes dominate the current cycle. “Security”, that perennial beneficiary of geopolitical angst, is the fastest-growing. Rising global tensions, from the South China Sea to Eastern Europe, have made defence, cyber protection and supply-chain resilience fashionable again.

Meanwhile, artificial intelligence and big data remain the era’s pre-eminent technological lodestar. A wave of products promising to capture the spoils of generative AI has attracted asset managers and investors alike, even if the long-term winners remain elusive.

Geography tells its own tale. Europe, still the world’s largest thematic market, now accounts for just 44% of global assets, its lowest share in a decade. Its recovery has lagged, reflecting a region that once led every fashionable structural-growth narrative, from clean energy to robotics, but has recently found itself short of risk appetite and long on regulatory caution. For ten consecutive quarters, European investors have withdrawn money from thematics.

Thematics are catching on in China

Elsewhere enthusiasm is livelier. China is powering a surge in what Morningstar calls the “Rest of World” category, whose share of global thematic assets has leapt by eight percentage points to 32% since 2021. Chinese managers, long focused on domestic tech and digital-economy plays, now rank among the global top ten thematic providers, jostling with BlackRock (which holds only a slight lead worldwide) and Pictet, the Swiss specialist that helped define the modern thematic genre.

America, meanwhile, is enjoying a revival of its own. US thematic assets have grown 50% over the past three years, now representing 23% of global assets. Active exchange-traded funds, the vehicle of choice for many American investors, have helped fuel the rebound.

Regional preferences remain pronounced: Europe continues to favour energy transition strategies and broad “future of” funds; the US increasingly gravitates toward national-interest themes such as re-shoring and deglobalisation; and China’s investors have an outsized appetite for the digital economy. One of the biggest global beneficiaries of this regional mix is nuclear power, boosted both by decarbonisation goals and the insatiable electricity demand of data-hungry AI models.

Money is flowing again. Thematics attracted $55bn of net inflows in the first three quarters of 2025, putting the sector on course for its first positive year since 2021.

Related thematic ETFs

	Artificial Intelligence & Robotics UCITS ETF	Artificial Intelligence LON:ARKI / USD

	Artificial Intelligence UCITS ETF	Artificial Intelligence LON:INTL / USD

	BioRevolution UCITS ETF	Genomics LON:WDNA / USD

	Cybersecurity UCITS ETF	Cybersecurity LON:WCBR / USD

	Europe Defence	Defence LON:WDEF / EUR

	Genomic Revolution UCITS ETF	Genomics LON:ARKG / USD

	Uranium and Nuclear Energy	Clean Energy LON:NCLR / USD