When it comes to timing for new exchange traded funds, it can be said there are four possible outcomes: good timing, bad timing, neutral and absolutely hitting the ball out of the park.
Good and bad timing are self explanatory while neutral can be viewed as fund attracting modest flows, doing just enough to generate some interest and just enough to stay afloat. The hitting the ball out of the park designation is the unicorn for new ETFs.
The Global X Telemedicine & Digital Health ETF (EDOC) is a prime example of a unicorn new ETF. EDOC was profiled here earlier this month, about a week after it debuted. At that time, the fund was flirting with $58 million in assets under management. Soon thereafter, EDOC jumped to $175 million in assets under management.
Proving that it's one of the most well-timed new ETFs to come to market in some time, EDOC has $298.15 million in assets as of Aug. 25. What's impressive about that asset-gathering acumen is that EDOC didn't debut with the backing of a well-heeled investor as some new ETFs do. As is the case with most new ETFs, EDOC came to market with just a couple of million dollars in seed capital. In other words, its growth is organic.
Asset-gathering proficiency is alluring and important for new ETFs. It shows other potential investors that “there's something to see here,” but that's only part of the story. As was noted in this space when EDOC debuted, the fund has the benefit of good timing owing to the coronavirus pandemic, which is facilitating increased use of telemedicine and related technologies.
“Use of telemedicine by US physicians has increased significantly as a result of the COVID-19 outbreak,” said GlobalData. “In a survey conducted by data and analytics company GlobalData, 79% of specialists indicated that their use of telemedicine technology had increased as a result of the pandemic, while 20% indicated that their use had stayed the same.”
Telemedicine's intersection with the pandemic is relevant because it shows investors a fund like EDOC is relevant today, but also reminds market participants the growth proposition here was in place prior to 2020 and will be strong after the virus is defeated. Said another way, as is the case with other high-growth industries, such as e-commerce and fintech, the pandemic is speeding along previously growth in telemedicine.
“COVID-19 may be the tipping point for telemedicine as the full potential of the technology is increasingly realized by patients, healthcare systems and payers. As a result of the pandemic, regulations and policies governing reimbursement and use of telemedicine have changed significantly, leading to expanded access and an unprecedented demand for these services,” said Kathryn Whitney, director of thematic analysis at GlobalData.
Telemedicine and digital health was a $175 billion industry in 2019, pre-pandemic. It is forecast to grow to $657 billion by 2026, a period that, hopefully, won't include much coronavirus impact beyond this year.
Adding to the growth case for EDOC is that its 40 member firms help healthcare providers increase accuracy of diagnosis, streamline data collection and reduce inefficiencies. Bringing more technology to healthcare data and reducing waste can save patients and providers billions of dollars per year. Bottom line digital health is a win-win for a wide range of participants in the healthcare ecosystem.
“Telemedicine can assist in physician shortages by increasing practice efficiency and capacity, as well as reduce healthcare costs for primary and secondary care providers by lowering burdens on resources and reducing hospitalization rates and emergency room visits,” according to GlobalData.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.