(Bloomberg) — Avoiding the shadows of Kathy Wood and ARK Investment Management is hard enough in the thematic-fund business. Imagine if you were one of the few other female CEOs in the $7 trillion US exchange-traded fund industry – who is also pursuing disruptive tech bets.
Sylvia Jablonski is fearless. The newly installed CEO of Defense ETF says his $1.5 billion firm is already there thanks to its near-term investment horizon — ARK famously invests for five years — and asset mix.
She now plans to differentiate the firm from ETF rivals with expansion into the crypto space, the 43-year-old said in an interview. It may bring in new competitors – think Grayscale Investments and Bitwise Asset Management – but Jablonski believes there is nothing quite like Defence.
“We are not quite ARK and we are not quite grayscale or bitwise,” she said. “We are going to be a well-diversified fintech asset management firm with an active digital asset crypto business, a rapidly growing thematic ETF business and multi-billion dollar assets under management.”
Although he declined to disclose specific details, the new CEO said he plans to strengthen Defense’s eight ETF lineup with funds to house on “dynamic disruptive trends.”
This is a difficult time for a leading thematic-funding provider. A survey released this month by Brown Brothers Harriman revealed that 38% of ETF investors plan to allocate one-fifth of their portfolios to thematic strategies — those that follow trends such as space exploration and robotics — over the next five years. We do. But research is questioning the long-term performance of these fashionable trades.
After a pandemic-fueled boom, thematic ETFs have struggled in 2022 as volatility plagued equity markets. According to Bloomberg Intelligence, without the $2.1 billion inflows in March, the cohort would have faced net outflows of more than $500 million this year.
Wood and ARK, which were once the standard bearers of the boom, now represent the bust. The flagship ARK Innovation ETF (ticker ARKK) is down about 30% year-over-year.
Defense ETFs have mostly outperformed slightly. Most of the assets are in the $1.2 billion Defense Next Gen Connectivity ETF (FIVG), down about 8.5% in 2022 and posting an outflow of about $107 million over the same period.
“Current market volatility, rate hikes, geopolitics have caused a lot of investors to panic, and are on edge or cash out,” Jablonski said. “Many times they will sell their thematic ETFs first to raise money. I think that will change over time.”
Jablonxi, Defense’s chief investment officer for a little more than a year, was named CEO earlier this month after Matthew Bielsky stepped down to take the same position at parent company Defense Group Holdings. She joined the firm after 11 years at Direxion, where she was a managing director.
According to James Seifert, ETF analyst at Bloomberg Intelligence, the defense is on the map because of its “great early ticker” and ability to launch funds in certain places before the big issuers swoon.
The firm was the first to launch a psychedelics ETF – the Defense Next Gen Alted Experience ETF (PSY) in the US. It also includes the Defense Quantum ETF (QTUM) and the Defense Digital Revolution ETF (NFTZ), which invests in crypto mining and blockchain technology firms.
“Some of the areas we’re asking investors to focus on are taking off right now,” Jablonski said. “We’re not saying you have to wait 10 years.”