New York-based Tema ETFs has introduced its third actively managed ETF with a medical bent, the Tema Neuroscience and Mental Health ETF (MNTL). The new fund invests in companies working on treatments for people with neurological diseases and psychiatric disorders.

According to the firm, central nervous system diseases such as Alzheimer’s, schizophrenia and depression affect more than one billion people in the world, and Tema ETFs wants to be at the forefront in battling those diseases, said David Song, an investment partner at the firm and the manager of the new ETF. (He’s also a medical doctor.)

“We want to invest in companies that can provide breakthrough solutions,” he said. “We want to be willing to pay for this type of innovation in business models at a reasonable starting valuation.”

The ETF invests in 35 to 48 firms, the core of which are small- to mid-cap biotech firms, Song said. It will also take defensive positions in larger-cap biopharma names and in medical device companies and service providers.

The 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,” said Maurits Pot, chief executive officer and founder of Tema, in a statement. “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.” 

Song said that 25% of the core companies the firm invests in are trading below value as they emerge from a bear market.

“So you have attractive starting valuations combined with favorable fundamentals,” he said. 

The firm is optimistic about the timing of the launch given the many current neuroscience innovations and potential breakthroughs. These include new genetic drugs, including one that can help with therapy for Alzheimer’s, Song said.

This is the third fund in Tema’s medical ETF lineup. In August, it launched the Tema Oncology ETF (CANC), and in late November it introduced its Tema Cardiovascular and Metabolic ETF (HRTS). Song said the latest fund should serve several purposes within an investor’s portfolio, one of which is to get exposure to healthcare companies, as well as to the hot tech market in general.

The ETF, which is currently live, has an expense ratio of 75 basis points, and is available on most major platforms, Tema said.