Exchange-traded fund provider PureFunds, in partnership with ETF Managers Group, a white-label services provider, has launched a new ETF targeting the global healthcare technology sector. The PureFunds ETFx HealthTech ETF (Nasdaq: IMED) invests in 60 companies providing transformative technology to the healthcare and medical industries.
Andrew Chanin, CEO of PureFunds.
The ETF concentrates on three technology-driven facets of the healthcare field, namely healthcare informatics (19.7%), medical instruments (38.3%) and medical devices (42.0%).
Andrew Chanin, CEO of PureFunds, commented: “IMED’s key differentiator is an investment thesis around the premise that companies successfully practicing interdisciplinary convergence may lead in their respective markets. We believe that we are in the early phases of the era of convergence in the broader healthcare technology segment and on the cusp of transformative solutions coming to market.
“As an example, the next phases of healthcare informatics will leverage areas as diverse as nanotechnologies, advanced sensors, predictive big data analytics, cloud computing and virtual reality to bring about yet another paradigm shift to cut costs and boost operational efficiencies. IMED is intended to serve as a vehicle for investors to gain exposure to this highly innovative, technology-driven slice of the broader healthcare sector.”
The strategy aims to capitalise on increasing demand for healthcare, driven by an ageing global population. Indeed, the Center for Medicare and Medicaid Services estimates that the healthcare sector will reach 20% of US Gross Domestic Product by 2020. PureFunds believes healthcare technology companies may be well placed to profit from this trend due to their ability to introduce disruptive technologies that revolutionize current paradigms and reduce costs thereby reaching a wider customer base.
Sam Masucci founder and CEO of ETF Managers Group, said: “I think investors will be surprised to see the exposure that IMED offers; these health technology companies do not receive the same media attention as large healthcare providers or biotechs developing new drugs yet it is their aim to fix the systemic problems in healthcare and greatly improve on the time and price efficiencies of getting quality healthcare to the public.”
Elias Azrak, Co-founder of ETFx Investment Partners, the index provider for the fund, added: “As costs continue to pile up in the rapidly changing healthcare industry, hospitals, providers, doctors and others who work in the space are becoming heavily reliant on technological advances and improvements to save time and money. IMED presents an intriguing opportunity to tap into this technological renaissance taking place in the healthcare field.”
The ETF tracks the equal-weighted ETFx HealthTech Index. The index screens stocks according to market capitalizations and liquidity requirements, while ensuring eligible firms conduct the majority of their operations within at least one of the three healthcare technology segments to which they are subsequently assigned. Firms receive an equal weighting within their respective segment while the segments are assigned specific weights in the final index according to the following schedule: healthcare informatics (16%), medical instruments (39%) and medical devices (45%). The index is reviewed semi-annually in March and September and is rebalanced quarterly.
As of 30 August 2016 the index has significant exposure to the US (55.4%), Japan (9.5%), Germany (5.0%) and the UK (4.2%). The largest of 60 constituents in the index holds a weight of 2.7%.
The index is up 9.8% year-to-date and 12.5% per annum using back-tested data from June 2005. It has shown 18.6% volatility per annum since inception.
Source: Solactive.
The fund has a total expense ratio (TER) of 0.75%.
While the PureFunds ETF is rather unique in offering exposure to firms developing a wide range of healthcare technologies, there are several US-listed funds targeting biotechnology companies, the largest of which are provided by iShares and SPDR ETFs.
The $7.3bn iShares Nasdaq Biotechnology ETF (Nasdaq: IBB) tracks the performance of an index referencing all biotechnology firms listed on the Nasdaq Exchange. The fund has 185 constituents of which the largest holdings are BioGen (8.5%), AmGen (8.5%), Celgene (7.9%), Gilead Sciences (7.0%) and Regeneron Pharmaceuticals (6.9%). The TER is 0.47%.
The $2.0bn SPDR S&P Biotech ETF (NYSE Arca: XBI) tracks the S&P Biotech Select Industry Index, comprising stocks in the S&P Total Market Index that are classified in the GICS biotechnology sub-industry. The fund has 89 constituents of which the largest holdings are Ionis Pharmaceuticals (3.1%), Medivation (3.1%) and Sarepta Therapeutics (3.1%). The TER is 0.35%.