Tema adds neuroscience ETF to thematic offering

Jan 30th, 2024 | By | Category: Equities

Tema has expanded its suite of active thematic ETFs with a new fund that invests in biotechnology companies tackling mental health disorders and diseases of the central nervous system.

Tema adds neuroscience ETF to thematic biotechnology suite

The ETF targets biotechnology companies treating diseases of the central nervous system.

The Tema Neuroscience and Mental Health ETF (MNTL US) has been listed on Nasdaq with an expense ratio of 0.75%.

The World Health Organization reports that over one billion people globally are affected by central nervous system diseases, representing a significant economic challenge for healthcare systems. These conditions, often lacking disease-modifying treatments, create a substantial and rapidly expanding market opportunity with significant payer acceptance.

In response to this market opportunity, the biotechnology sector has unleashed a wave of recent innovations, ranging from pioneering Alzheimer’s treatments to advancements in gene editing, non-opioid pain management, and targeted depression therapies.

Amid this backdrop, the biotechnology sector is also emerging from one of its most severe downturns in decades with many smaller companies valued lower than their net cash, presenting a distinctive investment landscape.

While the investment opportunity appears compelling, the biotechnology sector’s inherent complexities involving scientific, regulatory, and financial risks necessitate a blend of investment acumen and scientific knowledge for effective navigation, supporting the notion of an active management approach to the theme.

Maurits Pot, Founder and CEO of Tema, noted: “Our Neuroscience and Mental Health fund offers targeted exposure to a major life sciences field that we feel is witnessing an acceleration in breakthrough innovations, transforming patient lives and outcomes. As these areas burgeon with innovation and the investment universe expands, we feel there is a growing need for domain expertise and active management to navigate risk.”

Investment approach

The ETF sources its constituents from developed markets worldwide, selecting firms with market capitalizations above $100 million.

Tema leverages its research expertise to identify companies poised to revolutionize treatments in mental health and neurological disorders, focusing on those firms with attractive valuations. To be considered for inclusion in the portfolio, a company must derive at least 50% of its revenue from products or services related to the targeted theme.

Eligible types of entities include large pharmaceutical firms, biotechnology companies in various development stages, diagnostic-focused businesses, medical device companies, and healthcare service providers.

What also sets Tema apart is its commitment to risk management and capital preservation, contrasting with many thematic strategies that are considered risk-on trades. The firm diligently monitors risk through a three-step process: identifying risk factors, assessing risk levels, and taking proactive measures to manage these risks effectively.

The ETF currently has 45 holdings with more than three-quarters (78%) of the portfolio allocated to US-listed stocks. The next-largest country exposures are Ireland and The Netherlands at 8% and 6%, respectively.

Notable stock positions, each of which accounts for a weight between 3.5% and 5.0%, include Vertex Pharmaceuticals, Regeneron Pharmaceuticals, Biogen, Neurocrine Biosciences, Eli Lilly & Co, Argenx, Penumbra, Stryker, Ionis Pharmaceuticals, and Dexcom.

MNTL extends a third pillar to Tema’s strategic life sciences fund line-up with the firm also offering two similar ETFs focusing on pioneering healthcare companies specializing in oncology and the treatment of cardiovascular & metabolic diseases.

Tags: , , , , , , ,

Leave a Comment