A niche issuer is launching a biotechnology exchange-traded fund whose key holdings include firms benefiting from the hype around weight-loss drugs.
The Tema Cardiovascular and Metabolic ETF (ticker HRTS) tracks companies involved in the treatment of cardio-metabolic diseases — a term that links cardiovascular diseases, obesity and diabetes. The ETF, which has a novel investing mandate in the world of thematic allocations, charges a 0.75% management fee.
The actively managed fund has 20 to 25 core positions, including Eli Lilly & Co. and Novo Nordisk A/S, as well as Arrowhead Pharmaceuticals Inc. and Bridgebio Pharma Inc., said Maurits Pot, founder and chief executive officer of Tema ETFs.
Its launch coincides with a period of heightened awareness surrounding a new generation of obesity drugs. The list includes Novo’s Ozempic — originally used to treat diabetes — and Wegovy, as well as Eli Lilly’s diabetes drug Mounjaro and Zepbound, which recently received approval to treat obesity. Novo’s American depositary receipts are up more than 50% this year while Eli Lilly’s shares rallied more than 60%.
Pot says HRTS is looking to invest in structural trends rather than ride momentum trades.
“We don’t focus on what is hot today,” he said in an interview.
While HRTS already has well-established rivals like the $6.4 billion iShares Biotechnology ETF (IBB) and the $6 billion SPDR S&P Biotech ETF (XBI), Pot said Tema’s ground-up, research-driven approach sets it apart. The new fund’s portfolio manager is David Song, a doctor who has over 25 years of life-sciences investing.
“I like that they are using a specialist for the respective theme,” said Athanasios Psarofagis, Bloomberg Intelligence ETF analyst, referring to the portfolio manager. “It’s a very interesting play because they are taking thematics up to one level higher since its more specific compared to other thematic funds.”
Overall, investors have yanked $4.7 billion from thematic ETFs so far this year, compared with $2.4 billion last year, according to Bloomberg Intelligence data. Such funds had boomed during the pandemic, garnering $46 billion in 2020 and $49 billion in 2021, the data showed.
HRTS is the second fund in Tema’s life-sciences lineup. The New-York based firm, which launched in 2023 and has around $40 million in assets under management, plans to debut a neurology-focused ETF — the third fund in its life-sciences roster — early next year, Pot said.
--With assistance from Vildana Hajric.
