Earlier this month GinsGlobal Index Funds teamed-up again with white-label platform HANetf to launch a healthcare innovations ETF. It sounds exciting, the concept of blending AI with anything that can help people get better seems like a no brainer. But there’s already an ETF focusing on health innovation, so is this new ETF a worthwhile addition to the space?
The Han ETF will give investors access to Indxx Advanced Life Sciences & Smart Healthcare Thematic index, which offers exposure to companies across the globe that are at the forefront of healthcare innovation.
Healthcare innovation is essentially the marriage of AI and robotics with the healthcare sector. As innovation has grown in the healthcare field there are now better ways to improve the industry’s offerings and abilities.
For example, life-saving operations can be performed with a robot which reduces risk for the patient. It’s also meant faster recovery for patients.
But investors are still to be convinced.
Access to the sector has been available for nearly three years through the iShares Healthcare Innovation UCITS ETF (DRDR). It’s also available in USD with the ticker HEAL, but it only has assets of $479m. Its YTD return is quite good though at 8.79%.
The performance of iShares DRDR (in black below) still lags pure healthcare ETFs, such as the Amundi CH5 ETF (in orange below). The difference between the ETFs is that DRDR goes beyond regular pharmaceuticals and healthcare and looks at companies that address key healthcare issues.
Source: Bloomberg
Despite their focus on innovation, these ETFs remain part of the equity asset class so are subject to the same hits as most other equities. As the graph above shows DRDR was not immune to the market falls at the end of last year.
The top three holdings in the iShares DRDR are Ionis Pharmaceuticals – a RNA-targeted drug discovery and development company; Divi’s Laboratories – a manufacturer of pharmaceutical ingredients; and Evotec - a biotech company. There are 76 constituents in the underlying index, which is offered by iSTOXX. The ETF is also not too expensive with a TER of 0.40%.
So, why has the new HAN ETF been launched now and what does it tell us about the industry?
As mentioned, HAN’s new ETF - the HAN-GINS Indxx Healthcare Innovation UCITS ETF (WELL) tracks the Indxx Advanced Life Sciences & Smart Healthcare Thematic index.
The index currently holds 88 securities (12 more than the iSTOXX® FactSet Breakthrough Healthcare Index used by DRDR). Its top five holdings are different to the iShares ETF and include Edwards Lifesciences - a global leader in the science of heart valves and hemodynamic monitoring; Intuitive Surgical – a company that creates robotic-assisted systems for surgeons; Regeneron Pharmaceuticals – a biotechnology company; Boston Scientific – a medical device company, and Illumnina – a company that focuses on sequencing and array-based solutions to analyse genetic variation.
To be included in the HAN ETF, constituents must generate most of their revenues from innovative health-tech sectors including bioinformatics, bioengineering, genome sequencing, healthcare trackers, nanotechnology, neuroscience, robotics and medical devices. The 88 current constituents have a combined market capitalisation of $824bn.
Hector McNeil, co-founder and co-CEO, HANetf, said in a statement that it allows “investors to incorporate long-term, transformational technological trends into their portfolios… Healthcare has been a core portfolio holding for decades, and with this new ETF, we go beyond 'Big Pharma' to capture the companies that are addressing the key healthcare and wellness challenges of our time."
Anthony Ginsberg, founder and managing director at Gins Global Index Funds, added: "Healthcare advances over the past 100 years have dramatically increased human lifespans and reduced the risk of death from communicable diseases like malaria or influenza.”
There are other reasons to be aware of this sector. This is driven by growth, an ageing population, and the advancement in healthcare and technology generally.
Nik Bienkowski, co-founder and co-CEO at HANetf, told ETF Stream: “This is still a new space but investors are really starting to wake up to this theme, as well as impact investing. While we have been marketing our other technology themes, it’s become apparent that our clients were very interested in innovative healthcare.
“The pace of technological change is now so rapid, that many of the medical and healthcare advances that only a few years ago would have seen as inaccessible, almost sci-fi like, are now commonplace. There is frequent coverage in mainstream media of new genomic and medical robotics advances that have grown investor consciousness of the theme. With the prevalence of smart watches and fitbits, Healthcare technologies have become tangible and widespread.”
If you want access to these ETFs they are available on the London Stock Exchange.
WELL
WELP
DRDR
HEAL
ETFYTD RTNTERINDEXHAN-GINS Indxx Healthcare Innovation UCITS ETFn/a0.75%Indxx Advanced Life Sciences & Smart Healthcare Thematic indexHAN-GINS Indxx Healthcare Innovation UCITS ETFn/a0.75%Indxx Advanced Life Sciences & Smart Healthcare Thematic indexiShares IV PLC-iShares Healthcare Innovation UCITS ETF8.29%0.40%iSTOXX® FactSet Breakthrough Healthcare Index, which captures the performance of developed and emerging market companies focused on pushing the boundaries in medical treatment and technologyiShares IV PLC-iShares Healthcare Innovation UCITS ETF10.64%0.40%iSTOXX® FactSet Breakthrough Healthcare Index, which captures the performance of developed and emerging market companies focused on pushing the boundaries in medical treatment and technology
