New York-based Tema ETFs is seizing on an opportunity it sees in the biotech and healthcare space with the launch of its latest thematic ETF, the Tema Cardiovascular and Metabolic ETF (HRTS).
It is the first fund globally to invest in companies developing treatments for obesity and diabetes and metabolic and cardiovascular diseases, according to the company. The firm believes that it is an under-represented market and has tremendous growth potential, said David Song, investment partner at Tema ETFs
“We looked at a number of areas in medicine and we found significant innovation that’s in tech or really accelerating,” he said. “One area of interest is the full diverse area of cardiovascular and metabolic medicine.”
The fund, which Song manages, is an actively managed ETF that invests in three different types of companies across the cardiovascular and metabolic areas of medicine.
The first are pre-revenue companies, which are event-driven in that actions such as case studies will push their performance. The second are single or two-product companies, according to Song. These companies are experiencing embryotic or significant growth, he explained.
“They may not yet be at peak or market generating margins, or profitability, but they’re growing their revenue,” he said. “They’re building their commercial operations.”
The final group are large well-diversified companies with well-established cash flows.
“Some of these companies have been high-quality companies that are trading at reasonable valuations,” he said.
HRTS is the latest in a series of thematic ETFs the firm has launched and the second in the life sciences area. It launched the Tema Oncology ETF (CANC) in August. Its other thematic ETFs, which are also actively managed, focused on luxury space, reshoring companies, and companies with strong business models, Song said.
The most recent ETF has an expense ratio of 75 basis points, which the firm said is comparable to other active ETFs in the industry. It is currently live and available on most major platforms, according to Tema.