The global thematic fund market is showing renewed signs of life, according to the latest report by Morningstar.
It shows that assets in thematic funds worldwide rose to $779 billion at the end of the third quarter of 2025, the highest level in three years. However, this figure still falls short of the late-2021 record by roughly 15%.
The United States now accounts for about 23% of the global total, with US thematic assets rising approximately 50% over the past three years, largely thanks to thematic ETFs. Europe is still the largest market with about 44% of global thematic assets, while its share has dipped below 50% for the first time in more than a decade, reflecting a sluggish recovery and continued net outflows. Europe is more focused on higher-fee active mutual funds compared to the US demand for thematic ETFs.
Meanwhile, the ‘rest of world’ category, powered by China’s rapid growth, has increased its share by around eight percentage points to roughly 32%.
Fund launches are rising again and in the first three quarters of 2025 the industry saw 82 new thematic fund launches which is more than double the total for all of 2024. This resurgence suggests fund managers are reinvesting in thematic strategies even as many older themes falter.
Technology based themes, especially AI and Big Data, remain front and centre, while security and defence related themes have gained momentum amid heightened geopolitical tensions. Conversely, previously popular themes such as energy transition or broad alternative energy strategies have struggled.
Although the alternative energy theme remains the largest thematic sub-group globally, it has also been among the weakest performers, with asset levels dropping more than 40% from their peak to trough.
For investors, the report offers caution that “In most regions, thematic funds charge more than their non-thematic counterparts,” and also notes that “While thematic funds have occasionally delivered eye-catching returns - most notably during the post-pandemic bull market - the odds of selecting a thematic fund that both survives and outperforms global equities over longer periods have been less than 10%.”
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