Each of these funds pivots off a key demographic trend. The Obesity ETF aims to profit from the growing roster of companies that help address a surging health problem. The OECD predicts that 47 percent of Americans will be classified as obese by 2030. And on a global basis, roughly $2 trillion is being spent annually to tackle the co-morbidity issues related to obesity.
Companies in the SLIM portfolio must derive at least 50 percent of their sales or revenue from the treatment of diabetes, stroke, sleep apnea, high blood pressure, heart disease or cholesterol, says Nick Cherney, one of the founders of VelocityShares and now head of exchange-traded products at Janus Henderson. In addition, weight loss and or plus-size apparel businesses are eligible for inclusion in the fund.
The Obesity ETF, which carries a 0.50 percent expense ratio, deploys a modified market cap-weighted approach and is based on the underlying Solactive Obesity Index. The top holding in the index can’t exceed 20 percent, while other top holdings are rebalanced downward each quarter if they constitute more than five percent of the index. This year’s strong return for the fund is due to triple-digit gains in holdings such as Dexcom and Medifast.
Cherney has been tasked with helping Janus Henderson build greater traction in the ETF segment. It hasn’t been an easy lift.
“The ETF space is crowded, and to stand out you need a well-designed product, solid performance and the right distribution,” Cherney says.
And there’s another factor as well “It’s up to the firm to raise awareness of these funds, and Janus hasn’t yet given a lot of exposure to these funds,” says Rosenbluth.
Cherney is taking the long view with his company’s thematic funds. “We remain focused on funds that capture long-term trends that will play out over decades,” he says. “We think these thematic ETFs have a strong story behind them, and we need to just keep building awareness around them.”
This might become a case of success begetting success. As The Obesity ETF and other Janus Henderson thematic offerings build more assets over time, they may be seen as sufficiently viable and liquid for a growing pool of investors.