ROBO Global, the advisory and indexing firm behind the first pure-play robotics ETF, has unveiled a new fund targeting innovative firms involved in healthcare technology.
The fund uses Robo Global’s proprietary research to target firms linked to healthcare technology.
The ROBO Global Healthcare Technology and Innovation ETF (HTEC US), which has listed on NYSE Arca, has been brought to market in partnership with white-label ETF platform Exchange Traded Concepts.
The fund tracks the proprietary ROBO Global Healthcare Technology and Innovation Index.
The index, which is maintained by Solactive, includes both developed and emerging market stocks with market capitalizations greater than $200 million and three-month average daily trading values of at least $1m.
The index uses ROBO Global’s industry classification system to identify healthcare innovators based on key sub-sectors: diagnostic; lap process automation; regenerative medicine; precision medicine; data and analytics; telehealth; robotics; and medical instruments.
Each eligible company is individually analyzed and assigned a score between 1 and 100 based on factors such as the proportion of revenue attributable to innovative healthcare technologies, as well as technology and market leadership within the healthcare technology space.
The index selects the highest-scoring companies with scores above 50, up to a maximum of 100 stocks. If fewer than 50 stocks have scores above 50, the index will select the highest-scoring companies until 50 constituents have been chosen.
Constituents are weighted according to their scores so as to heighten exposure to the underlying theme of healthcare innovation. The index is reconstituted and rebalanced on a quarterly basis.
“When developing the ROBO Global Healthcare Technology & Innovation Index, we put an emphasis on analyzing companies making the most dramatic impact on the healthcare sector of today and tomorrow,” said Jeremie Capron, Director of Research at ROBO Global. “Simply put, we are zeroed in on the disruptors rather than the disrupted.”
The index currently has 85 constituents. Stocks from the US make up more than three-quarters (78%) of the total index weight with the next largest country exposure being The Netherlands at just 3%. Medical diagnostics is the largest category at 26%, followed by diagnostics (19%) and precision medicine (12%).
Exposure is fairly evenly assigned between large-caps and mid-caps at 41% and 38%, respectively, with small-caps making up the balance.
The fund comes with an expense ratio of 0.68% due to a contractual fee waiver in place until at least September 2020. Its gross expense ratio is 0.80%.
“By and large, the healthcare industry appears to be primed for massive market growth thanks to the implementation of advanced technologies like robotics and AI,” said Travis Briggs, CEO of ROBO Global US “The healthcare AI market is expected to grow at a compound annual growth rate between 47-50% by 2025, a value of $36bn. We’re privileged to continue leveraging the knowledge of our distinguished advisory board members, who are on the front lines of industry innovation, to bring the growth potential of these technologies directly to investors.”
Healthcare innovation is a relatively underexplored theme in the US ETF market, though the new Robo Global ETF will not be first-mover in this space.
The fund will compete with the Principal Healthcare Innovators Index ETF (BTEC US) which tracks the Nasdaq US Healthcare Innovators Index. The index provides exposure to early-stage small-cap healthcare companies, primarily biotechnology and life science, which have the potential to create cures for cancer, develop new medical technologies, or spearhead other medical advances. This fund comes with an expense ratio of 0.42% and has accumulated $50m in AUM since launching in August 2016.
In Europe, there are several healthcare innovation ETFs. The largest being the $480m iShares Healthcare Innovation UCITS ETF (HEAL LN) which tracks the iSTOXX Factset Breakthrough Healthcare Index. This index includes global companies that derive more than 50% of their revenue from operations related to the breakthrough healthcare sector such as biological specimen storage, drug lead discovery, neurologic device manufacture and healthcare management software. Its expense ratio is 0.40%.