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VistaShares delivers innovative Liquid Alternative investment solutions for today's investors. VistaShares ETFs are actively managed by industry and investment experts, offering a number of distinct strategies. Supercycle® Growth Equity ETFs seek exposure to technology-driven economic Supercycles® that the adviser believes may offer long-term growth potential. Target 15® option-income ETFs seek to generate monthly income while complementing a core equity portfolio. Income is not guaranteed and will vary, and the Target 15® name refers to the strategy's objective rather than a guaranteed or promised return. Investing involves risk, including possible loss of principal. There is no guarantee that any investment objective will be achieved, and past performance does not guarantee future results.

Why a trend cuts across sectors

Traditional sector classifications sort companies by what they sell today. A trend sorts them by what they are exposed to tomorrow, and that cuts across the usual lines. A single robotics trend can draw from industrials, information technology and health care. A power trend can draw from utilities, industrials, energy and materials.

That is the point of a trend, and it has consequences. A thematic fund will often look nothing like the sectors a client already owns, which can be useful for diversification. It will also bring together companies that respond very differently to interest rates, commodity prices and the economy, so its behaviour can be hard to predict from the trend alone.

Space is a good illustration. Its companies include large, established aerospace and defence contractors, mid-sized component makers, satellite operators with steady service revenue, and small firms that are still years from profit. Put together, they share a story but not a business model.

Defence and power bring a different mix: established firms with large backlogs alongside smaller suppliers whose fortunes depend on winning particular contracts or connecting particular projects to the grid.

Reading the list of holdings, and asking which kind of company carries most of the weight, is usually more informative than reading the description of the trend.

The mix of company types also affects how a trend responds to the economy. Companies with long contracts and government customers tend to have steadier revenue. Companies selling to industrial buyers rise and fall with capital spending. Young companies funded by investors depend on markets being willing to keep funding them.

A thematic fund weighted towards one of those groups will behave like that group, whatever its name. That is why two funds on the same trend can feel very different to hold, and why the description of a trend is only the start of understanding a fund built on it.

It also means a trend's clearest long-run case and its most volatile stretches can arrive together, because the companies most exposed to the change are often the ones least able to weather a difficult market.

That cross-sector spread also complicates comparisons. A thematic fund's results are easy to set against a broad market index, but the more useful comparison is often against the sectors its holdings actually come from, which shows whether the trend added anything beyond those sectors' own movements.

For that reason a thematic fund is often easiest to understand by reading it the way a portfolio manager would: by holding, by sector and by size, rather than by the story that brought it together.

Seen that way, many thematic funds turn out to be concentrated bets on a few sectors and a few sizes of company, wrapped in a story that makes them look broader than they are.

Purity, breadth and the trade-off between them

Every thematic fund makes a choice between purity and breadth. A pure fund holds only companies that earn most of their revenue from the trend. It captures the trend closely, but the companies tend to be smaller, younger and more volatile, and there may be only a few dozen of them. A broad fund includes large companies for whom the trend is one business among many. It is easier to trade and steadier, but much of what it holds would be in a core index fund anyway.

Neither choice is wrong. A pure fund answers the question of how to own the trend itself. A broad fund answers the question of how to tilt a portfolio towards it. The danger is buying one while expecting the other: a pure fund can be far more volatile than expected, and a broad fund can turn out to be a more expensive version of the market.

Space and robotics are trends where the choice is stark, because many of the companies that are purely exposed are small. Defence and power have more large, established firms with heavy exposure, so a fund can be fairly pure without being as concentrated in small companies.

The holdings list and the revenue exposure figures that many index providers publish show where on that spectrum a fund sits.

Knowing where it sits makes it much easier to judge how the fund is likely to behave beside everything else a client owns.

Overlap is the practical test of where a fund sits. Comparing its holdings with a broad index shows how much of it is already owned elsewhere, and how much is genuinely new exposure. For a broad thematic fund, that overlap can be large enough that most of what a client is paying for is a different weighting of companies they already hold.

For a pure fund the overlap is usually small, but the liquidity of the holdings becomes the question instead. Smaller companies can be harder to trade in volume, and in stressed markets the fund's price can move further from the value of its holdings than it would for a fund of large companies.

Many investors end up somewhere in between, holding a fund that mixes a core of established companies with a smaller allocation to purer, younger ones. Knowing roughly what that mix is helps set expectations for how the fund will behave in both strong and weak markets.

Neither end of the spectrum is wrong. The useful thing is to know which end a fund is on, and to make sure that matches what the position is meant to do in the portfolio.

Where a fund sits can also drift over time, as companies grow, merge or change what they sell, so it is worth checking again at each review rather than once at the start.

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The subject of this address

This address writes about trends as an investment approach: the practice of grouping companies by the long-term change they are exposed to rather than by what they make today. A launch provider, a satellite operator and a maker of ground antennas can all belong to one space trend. A software firm and a gearbox manufacturer can share a robotics one.

That cross-sector reach is the appeal of a trend, and also the source of most of the questions that arrive here: how pure the exposure is, how concentrated, and how much of it overlaps with what a portfolio already holds.

Those questions are better asked before a fund is bought than after it has had its first difficult year, and they can almost always be answered from the fund's own documents.