Thematic ETFs have maintained their impressive momentum in early 2026, building on a resurgent 2025. After gathering $23 billion last year, the category added another $4 billion in January alone. However, as the market landscape shifts, the inherent challenges of thematic investing—such as timing individual trends and managing overlapping exposures—remain a hurdle for many. The VettaFi Thematic Rotation Index offers a disciplined solution, utilizing quality and momentum scores to navigate these rotations systematically.
A Multi-Sector Approach to Global Megatrends
VettaFi’s approach extends far beyond the typical technology-heavy thematic lens. While it powers tech-focused funds like the Amplify Video Game Leaders ETF (GAMR) and the ROBO Global Artificial Intelligence ETF (THNQ), the index family also captures critical trends in energy, financials, materials, and healthcare.
The thematic rotation index is rebalanced quarterly. It applies an equal-weighting strategy to selected themes and capping individual company exposures at 8%. This structure is designed to mitigate the concentration risk that often plagues thematic portfolios, while also reducing the tax burden associated with manual trading.
Inside the Rebalance: Identifying Leaders and Laggards
The late December rebalance highlighted seven sub-themes that currently dominate the index based on VettaFi’s factor analysis:
While these sectors thrived, previously hot themes like Cloud Computing and Travel & Leisure saw their momentum fade. As of January 31, 2026, the largest constituents reflected this diverse mix, including American Express (4.7%), Cameco (3.6%), Charles Schwab (3.4%), and Eli Lilly (1.9%).
Lowering Benchmark Overlap for Better Alpha
One of the most compelling aspects of the rotation index is its ability to complement core holdings. While it includes household names like Microsoft and NVIDIA, it also provides exposure to lesser-known innovators like D-Wave Quantum and Rigetti Computing. This results in a relatively low overlap with major benchmarks—just 21% with the S&P 500 and 23% with the Nasdaq 100. A total of 185 companies were part of the VettaFi index with a median market capitalization of $18 billion.
This tactical breadth paid off in the 12 months ending January 2026. The VettaFi index delivered a 24% return, outpacing the Nasdaq 100 (20%), the S&P 500 (16%), and the iShares US Thematic Rotation Active ETF (THRO) (13%). While the United States remains the primary geographic weight at 60%, the index’s global reach—spanning Australia, Canada, China, Denmark, and Japan—provides the cross-border diversification necessary for today’s market environment.
VettaFi LLC (“VettaFi”) is the index provider for GAMR and THNQ, for which it receives an index licensing fee. However, GAMR and THNQ are not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of GAMR and THNQ.
Originally published on ETF Trends
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