Many of the disruptive market forces setting the stage for things to come in the next decade got catapulted to the forefront of investors' minds, and that played out in the performance of some of the best ETFs in 2020.
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As the global coronavirus pandemic added fuel to the fire, so did the spread of working remotely. With it came fast connectivity, cybersecurity, genomics, robotics, vaccines, climate change, green energy, artificial intelligence and autonomous driving.
As the world's largest asset manager with nearly $8 trillion in total assets and $2.3 trillion in iShares ETFs, BlackRock (BLK) has identified five big trends that are here to stay for the long haul. Investors can get exposure to these drivers via 17 iShares ETFs.
The New York-based money manager calls these the "5 key megatrends." These are secular changes that will shape our long-term future. They include technological breakthroughs, demographics and social change, rapid urbanization, climate change and resource scarcity, and emerging global wealth.
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"We're talking about long-term, transformational opportunities," said Jeff Spiegel, head of iShares megatrend and international ETFs at BlackRock. "We don't see megatrends as a momentary trade or a tactical trade."
Hot ETFs With Entry Points
Some have "really accelerated and have exciting entry points," he said. "But again, not for a trade, but for the long term." Spiegel explained that BlackRock organizes the megatrends framework as part of a global effort across BlackRock and its Investment Institute.
Megatrends "is the fastest-growing category of ETFs," said Spiegel. "We've seen year to date about $26 billion come into the space. Last year we saw $5 billion and even that was a pretty fast growth rate."
BlackRock entered the megatrends space in June 2019 after closely consulting with various investors and finding "appetite and readiness for this new way of investing," he noted. "Obviously, no one could've predicted or wished for the events that unfolded this year. Given that these trends are long-term transformations, often when you go through a difficult period, long-term trends seem to accelerate faster as the economy readjusts."
A similar situation took place after the 2008 financial crisis. "Social media and e-commerce, which were really powerful trends that started in the late 1990s, took off as the economy shifted in the mid-to-late 2000s," Spiegel said.
3 Best ETF Picks Now
Three funds provide an insight into the most exciting breakthroughs and innovations investors can expect now and into the future.
IShares Genomics Immunology and Healthcare (IDNA) is part of the demographics and social change megatrend. This megatrend focuses on the aging population. As the 65-plus age group will spend significantly more on health care in coming years, this will drive huge investment into medical research and development.
The fund has amassed over $180 million since its inception in June 2019, over 95% of which came in this year. IDNA has returned over 40% YTD. It charges a yearly management fee of 0.47% of assets. It invests in developed and emerging market firms that are long-term innovators in the fields of genomics, immunology and bioengineering.
The fields of genomics and immunology have especially been important this year due to the coronavirus pandemic and the skyrocketing demand for the fast development of Covid-19 testing, vaccines and treatments. IDNA holdings in this area include Moderna (MRNA), BioNTech (BNTX), Gilead Sciences (GILD) and Regeneron Pharmaceuticals (REGN).
Genomics, which is the study of the mapping, editing and sequencing of genomes, also holds the promise for personalized curing of major diseases in the future. Firms that are at the forefront of such innovations include CRISPR Therapeutics (CRSP), Mirati Therapeutics (MRTX), Invitae (NVTA) and Genmab (GMAB). Genmab is a member of Investor's Business Daily's Global Leaders stock list.
ETF Aimed At Clean Energy
IShares Global Clean Energy (ICLN) has been another success in 2020. The $3.1 billion fund is the oldest of its kind, providing broad exposure to clean energy. It grew its assets sevenfold from $431 million at the beginning of the year. The surge in assets came from strong performance and $1.4 billion of inflow of new money from investors.
"It doesn't hold just wind or just solar," Spiegel explained. "It actually holds the full range: wind, solar, geothermal, hydroelectric, waste-renewable, hydrogen — so it becomes that one stop shop."
The fund surged 98% this year. Spiegel pointed out that consumer and government spending is shifting toward renewables. "Continued acceleration this year has a lot to do with stimulus spending around the world," he said. "The European Union has earmarked $300 billion worth of energy investment, France $100 billion above and beyond that. In the U.S., Biden has talked about a $2 trillion to $3 trillion program."
Top holdings include Plug Power (PLUG), up over 700% YTD, Enphase Energy (ENPH), up over 400%, First Solar (FSLR), a 65% jump, and Orsted (DOGEF), soaring 74%.
Self-Driving Cars
IShares Self-Driving EV and Technology (IDRV) focuses not just on vehicle manufacturers but on the whole value chain. This includes software developers, battery producers, charging station and infrastructure builders, navigation technology makers and parts builders.
IDRV started the year with $5 million in assets in outside investors money and has grown to $93 million. It's up 50% YTD and has an expense ratio of 0.46%.
IDRV includes leading names such as Tesla (TSLA), Alphabet (GOOGL), General Motors (GM), as well as German automotive chipmaker Infineon Technologies AG (IFNNF), Swiss charging station maker ABB (ABB), and Chinese electric vehicle and parts maker Nio (NIO). Tesla is a member of IBD's Leaderboard and Big Cap 20 stock lists. Alphabet has recently been a winner for IBD's SwingTrader.
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