New York-based Global X has launched a new thematic equity ETF investing in healthcare innovators with a focus on firms providing telemedicine services.
The fund targets firms engaged in telemedicine, healthcare analytics, connected healthcare devices, or administrative digitization.
The Global X Telemedicine & Digital Health ETF (EDOC US) has listed on Nasdaq and comes with an expense ratio of 0.68%.
The fund, which targets companies creating the ability to access healthcare services remotely, is the latest ETF to be inspired by trends emerging from the Covid-19 pandemic.
The ETF’s underlying reference is the Solactive Telemedicine & Digital Health Index which selects its constituents from a universe of global developed market stocks as well as American Depository Receipts (ADRs) of emerging market companies.
Eligible firms must have a minimum market capitalization of $200 million and an average daily trading value of at least $2m.
The methodology screens the universe for companies that derive at least 50% of their revenue from telemedicine, healthcare analytics, connected healthcare devices, and administrative digitization.
Telemedicine companies connect physicians and patients digitally, facilitating a range of medical activities including diagnosis, treatment, and medication management. Healthcare analytics deals with the collection, production, utilization, and storage of healthcare data for statistical analysis. Connected healthcare devices automatically transmit data and results to patients and physicians for real-time assistance or dynamic patient treatment. And companies serving in the administrative digitization sector play a crucial role in healthcare management processes including patient intake, staffing solutions, digital healthcare security, and hospital bookings and ratings.
Final security selection is driven by Solactive’s proprietary Natural Language Processing engine called ARTIS (Algorithmic Theme Identification System) which provides potential constituents with a thematic score indicating how closely aligned the firm is to the underlying theme. ARTIS analyses large volumes of company reports, financial news, and business descriptions in calculating thematic scores.
The index selects the 40 stocks with the strongest link to digital healthcare with the process being designed to favour firms engaged specifically in telemedicine.
Constituents are weighted by float-adjusted market capitalization subject to a 4% cap per stock. The index is rebalanced on a semi-annual basis.
While the index has a global reach, it is currently dominated by US-based firms which make up 82.4% of the total weight. The next largest country exposures are China (4.1%), Hong Kong (4.1%), and Japan (4.0%).
Telemedicine benefits
Telemedicine has been celebrated as a means to allow the ongoing connection between patients and doctors during the Covid-19 pandemic without additional risk of infection; however, Global X notes that healthcare digitalization also has the potential to address several long-standing concerns including sub-optimal patient outcomes, rising costs, and inefficient systems.
The firm highlights data from the OECD which showed that just 70% of member countries make healthcare records available to patients and only 64% share these records in an integrated network across providers.
Global X believes that overhauling healthcare systems to effectively capture, share, and analyze data could increase efficiency, accuracy, and ultimately improve patient outcomes. Integrated digital health solutions can streamline digital recordkeeping, enable patient data to be shared between doctors, allow for the real-time remote monitoring of patients, and facilitate the analysis of symptoms and treatments across population groups.
Luis Berruga, CEO at Global X ETFs, commented, “Despite ground-breaking advancements in genomics, pharmaceuticals, and biomedical devices, many aspects of the global health care system remain entrenched in outdated and analog processes. The accelerating adoption of telemedicine solutions over recent months puts into focus the immense benefits that digital technologies can have across the health care sector. We’re excited to launch EDOC and provide investors with targeted access to this disruptive theme.”