New ETF Gets Dynamic with DNA Investing

Investors who think that they are frequently hearing about disruptive technologies and revolutionary concepts are right. While they may sound like buzz words, many of these innovative ideas are credible.

Moreover, they're sticky and just scratching the surface of what are expected to be exponential growth trajectories. Investors looking to access one of the most compelling disruptive technologies and arguably one of the best runway to long-term growth may want to consider genomics. Numerous exchange traded funds make genomics investing easier for a broad swath of investors.

Add the newly minted WisdomTree BioRevolution Fund (WDNA) to that list. To be sure, WDNA is in its infancy – it debuted last week – but that's not a reason to ignore this fund. Quite the contrary. History proves investors shouldn't wait on others to enter new ETFs or for these products to mature, particularly when the underlying investment concept is fast-moving, such as genomics. WDNA tracks the the WisdomTree BioRevolution Index (WTDNA), which “is designed to track performance of companies that will be significantly transformed by advancements in genetics and biotechnology,” according to WisdomTree.

What Makes WDNA Unique

WDNA is one of 20 biotechnology exchange traded funds and one of several that focus on genomics and DNA sequencing. In other words, the new WisdomTree ETF enters a crowded field, meaning it's essential that it has avenues to set itself apart from established rivals. WDNA meets that standard and does so on multiple fronts. A significant part of the fund's differentiation proposition stems from index construction – an essential element in the passive investing equation.

With help from Dr. Jamie Metzl – an authority on biotechnology revolution – WDNA's index “identifies the key sectors and industry verticals that are expected to be most significantly transformed by advances in biological science and technology, as well as the companies that WisdomTree believes are most representative of this wave of innovation,” notes WisdomTree.

Another way in which WDNA separates from the pack is its reach beyond the healthcare sector. Typically, investors view genomics and DNA sequencing equities as solely members of the healthcare sector. However, this disruptive segment has implications beyond healthcare and intersects with industries investors may not readily associate with genomics, including agriculture, chemicals and materials.

While it may be surprising that the new ETF allocates about 15% of its weight to materials, consumer staples and energy stocks, that speaks to a broader opportunity set than many traditional biotechnology ETFs offer while underscoring genomics' ability to intersect with other industries and technologies.

WDNA Valid for Long-Term Investors

When it comes to disruptive healthcare stocks, investors are often tantalized by tales of rapid short-term gains, usually on the back of positive regulatory developments. However, getting to that stage can take some time.

That means patience is often required in this space and it's easier to exercise that virtue with a basket of stocks than with an individual name.

“Although the general direction and accelerating pace of this revolution are nearly certain, the time horizons for how each specific application will play out will vary,” adds WisdomTree. “Our approach targets dynamic companies deploying revolutionary technologies both in and outside of health care, and it invests in a wide range of 115 companies across the BioRevolution impact spectrum to reduce single-stock concentration risk.”

Bottom line: A WDNA wager could be a fruitful one for patient, risk-tolerant investors.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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