Tema has expanded its suite of active thematic ETFs with a new fund that invests in biotechnology companies specializing in the treatment of cardiovascular and metabolic diseases.
The fund provides exposure to biotechnology companies specializing in the treatment of cardiovascular and metabolic diseases.
The Tema Cardiovascular and Metabolic ETF (HRTS US) has been listed on Nasdaq with an expense ratio of 0.75%.
According to Tema, companies focused on the treatment of medical conditions associated with obesity, such as diabetes and heart disease, represent standout market opportunities with significant growth potential. The firm highlights a March 2023 report from the World Obesity Atlas which indicates that one in four individuals worldwide will be affected by obesity by 2035.
In response to this trend, the biotechnology industry is already witnessing notable advancements in the field of obesity therapeutics, driven by innovative drugs like Ozempic and Wegovy, while there has also been a resurgence of interest in cardiovascular therapies, fueled by novel platforms such as gene editing.
Biotechnology companies, in general, typically exhibit significant competitive advantages primarily in the form of high barriers to entry due to costly and lengthy clinical trials, large salesforce requirements in primary care markets, and substantial patent protection. However, Tema notes that the complex combination of scientific, regulatory, and financing risks within the industry requires investment and scientific expertise to navigate, supporting the notion of an active management approach to the theme.
Tema’s investment process combines top-down fundamental sector research, specialized industry knowledge, quantitative tools, and thorough bottom-up security analysis. The team conducts exhaustive research to pinpoint companies that offer groundbreaking solutions while maintaining 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 treatment of cardiovascular or metabolic diseases, as defined by the Centers for Disease Control and Prevention. This may include a range of entities such as large pharmaceutical firms, biotechnology companies in various development stages, diagnostic-focused businesses, medical device companies, and healthcare service providers. The ETF sources its constituents from developed markets worldwide, selecting firms with market capitalizations above $100 million.
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 42 holdings with three-quarters (75%) of the portfolio allocated to US-listed stocks. The next-largest country exposures are Denmark and Germany at 9% and 5%, respectively.
Notable stock positions include Eli Lilly (5.5%), Novo Nordisk (5.5%), Amgen (5.0%), Vertex Pharmaceuticals (4.5%), Bayer (4.5%), and Medtronic (3.5%).