So much of life is good timing and that's particularly true in the world of exchange traded funds. That sentiment is amplified when it comes to thematic ETFs.
In the burgeoning universe of thematic ETFs, issuers usually need to check at least one of two boxes – through two is preferable – to have legitimate chances at success. There's the all important race to be first to market within a particular niche or theme. Then there's ensuring the underlying theme is relevant when the fund comes to market, positioning it for relevancy and asset-gathering success.
A third box would be ensuring there aren't time restraints on the theme and/or that it's useful and appealing for long-term investors. At a week old, the Global X Telemedicine & Digital Health ETF (EDOC) is checking those boxes.
Adding to what's been a busy period of new healthcare ETFs launching against the backdrop of the coronavirus pandemic, the Global X Telemedicine & Digital Health ETF debuted on July 29, checking the good timing box. It's also the first fund dedicated to the telemedicine and digital health industries. Box number two checked.
EDOC tracks the Solactive Telemedicine & Digital Health Index and the rookie ETF's 40 components are firms engaged in “Telemedicine, Health Care Analytics, Connected Health Care Devices, and Administrative Digitization,” according to Global X.
Obviously, COVID-19 is increasing the allure of telemedicine for doctors and patients alike as visits to hospitals and healthcare facilities for anything but essential treatment are being delayed because of the pandemic. Data confirm the industry's impressive growth trajectory.
“Some U.S. health care providers report that telehealth visits, defined as consultations in which a patient connects with a doctor via voice or video chat, increased by as much as 175x since the pandemic began,” notes Global X in a research report.
As noted above, there's a growing number of healthcare ETFs with leverage to the battle against the coronavirus. However, the virus will eventually be defeated, potentially challenging the utility – at least in investors' eyes – of some these products. That won't be the case with EDOC because telemedicine growth projections aren't dependent on crises or pandemics.
It's not the most obvious comparison, but look at EDOC and telemedicine through the lens of e-commerce. That industry was growing before COVID-19 and its growth trajectory is being spurred by the pandemic, but the efficacy of the investment thesis won't be tarnished by the end of the virus. Same goes for EDOC.
“The market for these technologies reached an estimated $175 billion in 2019 and is expected to grow to over $657 billion by 2026,” notes Global X.
Courtesy: Global X
Beyond COVID-19, EDOC has the goods on multiple levels. Telemedicine increases access to quality care for American living in rural areas, far away from hospitals. Likewise, the industry does the same for those living in developing countries that lack the advanced, traditional healthcare systems found in developed nations.
Additionally, telemedicine is a financial game changer for patients.
“In the U.S., health insurance provider Anthem reduced its co-pay for telehealth visits to $5, a stark contrast to the $25-35 charged for in-person primary-care visits,” according to Global X.
On that note, digital health systems also reduce costs and waste for healthcare providers, enabling those companies to operate more efficiently, bolstering bottom lines while increasing quality of care.
Some investors are already buying into the EDOC story. The fund has $57.66 million in assets under management, a remarkable tally for a thematic fund that's not even two weeks old.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.