ETF Managers Group (ETFMG) has launched a new thematic ETF that was likely inspired by the Covid-19 pandemic.
The fund provides exposure to companies engaged in the testing and treatment of infectious diseases.
The ETFMG Treatments, Testing and Advancements ETF (GERM US) provides exposure to biotechnology companies that are involved in the research, testing, and treatment of infectious diseases.
The fund has listed on NYSE Arca and comes with an expense ratio of 0.68%.
While Covid-19 has greatly boosted the prominence of infectious diseases, ETFMG notes that the investment theme’s value goes beyond the current outbreak.
According to the World Health Organization, between 2011 and 2018, there were 38 epidemic events (outbreaks that occur over a wide geographic area and affect an exceptionally high proportion of the population) in the US alone.
Meanwhile, many health analysts predict that the occurrence of epidemic and pandemic events may become more frequent due to accelerating growth in trade, travel, and connectivity. For this reason, the human vaccines market is expected to grow to $72.5 billion by 2024, representing a compound annual growth rate of 11.2%.
Sam Masucci, CEO and Founder of ETFMG, commented, “GERM represents an investment theme that is much more than topical, it provides unique exposure to a previously underrepresented growth sector within biotech. We are excited to bring this product to US investors.”
Prof Reynold A. Panettieri, Director of the Institute for Translational Medicine and Science, added, “Our global health depends a great deal on innovation and discovery that will address how to prevent further infection with enhanced immune therapies or vaccines.
“GERM offers a unique approach that embraces cutting-edge technologies through cooperativity among Big/Small Pharma and biotech that can nimbly leverage discoveries and translate them into commercialized and impactful assets.”
Methodology
The ETF is linked to the Prime Treatments, Testing and Advancements Index which selects its constituents from a universe of US-listed stocks and American depository receipts.
Companies must have a minimum market capitalization of $100 million and an average daily traded value of $250,000 to be eligible for inclusion.
Index provider Prime Indexes screens the universe for stocks that qualify under either of two classifications: “Treatment Companies” or “Testing Companies”
Treatment Companies are pharmaceutical firms that have at least one vaccine or treatment for infectious diseases in any phase – from pre-clinical research to clinical trials to commercial availability.
Testing Companies include firms that derive more than 50% of their revenue from the research, development, manufacturing, and provision of biological tests for infectious diseases.
The index employs a weighting process that favours smaller-cap firms in a bid to enhance its growth profile. Constituents with market capitalizations above $15bn are equally weighted, while the total aggregate weight of these firms is set at just 10%. The five largest constituents with market capitalizations below $15bn are each assigned a weight of 6%. The remaining stocks are weighted by market capitalization subject to individual caps of 4%.
The index, which currently consists of 56 constituents, is reconstituted and rebalanced on a quarterly basis.