Investors pull the plug on Tomorrow's treatments ETFs
Tomorrow's treatments ETFs have witnessed outflows of -$255 million this year as investors avoid high growth high-risk sectors amid looming interest rate hikes. "Tomorrow's treatments" is an investment theme that focuses on ETFs investing in companies engaged in research and development of cutting-edge treatment, therapy, and drugs to treat common and rare diseases. Last year, investors added $650 million to the theme as innovative COVID-19 vaccines emerged in record time and opened the doors for the funding and development of new treatments. Scientists have already begun exploring the mRNA technology used in Pfizer-BioNTech and Moderna vaccines to create new vaccines and treatments of various diseases such as cancer.
Investing in America-domiciled Tomorrow’s Treatments ETFs
While tomorrow's treatments have recently gone out of favor, the name of the theme hints at the long-term prospects the investment holds. Investors in America can jump on board the theme through Robo Global Healthcare Technology and Innovation ETF (HTEC), ALPS Medical Breakthroughs ETF (SBIO), and ETFMG Treatments Testing and Advancements ETF (GERM) among others.
The largest of the pack is HTEC with $172 million in assets under management. The fund tracks the ROBO Global Healthcare Technology and Innovation Index and invests in companies engaged in developing breakthrough healthcare technologies vital for tomorrow's treatments. As of February 17th, 2021, the fund's top holdings include Vocera Communications (VCRA, 2.12%), Glaukos Corp. (GKOS, 2.06%), iRythm Technologies (IRTC, 1.84%), Boston Scientific Corp. (BSX, 1.73%), and Integra LifeSciences Holding (IART, 1.67%).
HTEC has a net expense ratio of 0.68% and trades on the New York Stock Exchange. Since its inception on June 25th, 2019, the fund has generated a cumulative return of +18% (as of January 31st, 2022). Meanwhile, HTEC has lost around -20% this year.
Investing in Europe-domiciled Tomorrow’s Treatments ETFs
European investors can gain access to the theme via iShares Healthcare Innovation UCITS ETF (HEAL), L&G Healthcare Breakthrough UCITS ETF (XMLH), and L&G Pharma Breakthrough UCITS ETF (ETLI).
HEAL is the largest with over $1.52 billion in assets under management. It aims to track the STOXX Global Breakthrough Healthcare Index and provides exposure to companies across the world that are focused on innovation within global healthcare services, across both developed and emerging markets. In terms of country exposure, the United States has the lion's share (70.77%), followed by South Korea (4.70%), Switzerland (4.47%), and Belgium (3.06%). The fund has 193 holdings and holds shares of Bioahaven Pharmaceuticals (1.58%), AbbVie (1.44%), Thermo Fisher Scientific (1.36%), Cerner Corp. (1.32%), Hologic Inc. (1.32%), Mettler Toledo (1.27%) to name a few.
HEAL has a total expense ratio of 0.4% and trades on multiple European exchanges including the London Stock Exchange (HEAL, USD or DRDR, GBP), the Borsa Italiana (HEAL, EUR), the Euronext Amsterdam (HEAL, EUR), the SIX Swiss Exchange (HEAL, USD), and the Deutsche Börse Xetra (HEAL, EUR). Since its inception on September 8th, 2016, the fund has generated a cumulative return of +62%. This year, HEAL (LSE, USD) fell by -18%.
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