Newly Launched ETF Targeting Obesity Drugs and Novo Nordisk Drops on Debut
The Tema Cardiovascular and Metabolic ETF (HRTS), featuring Novo Nordisk among its holdings, experiences a decline in its inaugural trading session.
A new exchange-traded fund (ETF) entered the market on Tuesday, generating excitement for its exposure to popular weight-loss medications and expanding the array of thematic ETFs available to investors willing to pay for the expertise of stock selection.
The Tema Cardiovascular and Metabolic ETF (HRTS), which made its debut on Tuesday, focuses on investments in companies engaged in combating diabetes, obesity, and cardiovascular diseases. According to data from Tema’s website, top holdings in the equity fund as of November 20 included Novo Nordisk (NVO), Eli Lilly & Co (LLY.SG), Amgen Inc (AMGN),
and Vertex Pharmaceuticals Inc (VRTX). The fund’s shares closed approximately 1% lower on Tuesday, in tandem with a broader market downturn, as reported by FactSet.
Novo Nordisk has garnered attention with its weight-loss medications Ozempic and Wegovy, while Eli Lilly’s Mounjaro falls into the same category of treatments, as noted by Jane Edmondson, head of thematic strategy at VettaFi, during a phone interview. She commented, “Big pharma is getting into this,” referring to weight-loss drugs. “But Novo and Eli are the only ones that currently have drugs on the market that people are taking for this purpose.”
Thematic exchange-traded funds typically come with higher expenses compared to “regular core” ETFs that invest in stocks and bonds, even though many passively track indexes, according to Edmondson. Actively managed ETFs, overseen by professional stock pickers with expertise in a specific theme, generally incur even greater costs.
The Tema Cardiovascular and Metabolic ETF has a net expense ratio of 0.75%, as indicated in its fact sheet. This expense ratio is higher than the “asset-weighted average expense ratio” of 0.4% for active ETFs, according to Aniket Ullal, head of ETF data and analytics at CFRA Research. He further explained that the simple average cost of actively managed ETFs is 0.67%, with a median of 0.60%.
The newly launched Tema fund is managed by David Song, a medical doctor with a career in biotechnology and healthcare investments, including positions at Rockefeller Capital Management and hedge fund firms Millennium Management and Balyasny Asset Management, as detailed in the fact sheet.
Although there are other pharmaceutical-focused ETFs, such as the iShares U.S. Pharmaceuticals ETF (IHE), the actively managed Tema Cardiovascular and Metabolic ETF stands out due to its specific focus, according to Ullal. The iShares fund, which tracks an index of U.S. pharmaceutical companies, boasts a lower expense ratio of 0.4%.
Regarding thematic alternatives, Edmondson mentioned the Global X Health & Wellness ETF (BFIT) as somewhat similar to the Tema Cardiovascular and Metabolic ETF in its consideration of well-being. The Global X fund, tracking an index of companies promoting physical well-being, carries an expense ratio of 0.5%, according to FactSet data.
