Coronavirus Spawns New ETF Filing Tracking Pandemic Fighters
While medical researchers worldwide search for vaccines and other medical responses to combat the coronavirus pandemic, financial researchers are quickly responding with investment products to leverage the value of companies working on solutions.
LifeSci Index Partners, a New York-based developer of healthcare-based market indices, will populate the index with companies searching for diagnostic, pharmaceutical, behavioral and other tools to protect and help people recover from current and emerging threats, including diseases caused by viruses and chemical warfare agents, according to the filing.
The index provider also will research companies with products, technologies or services that enable “social distancing and increased productivity for working and shopping at home,” secure national borders and ports, aid in stockpiling products in times of natural disasters and test and improve food and water safety and purity, the filing said. Bruce Kavanaugh and Michael Mack will be the portfolio managers of the proposed Pacer Advisors fund.
The BioThreat ETF filing is the second in two weeks seizing on investor interest in companies with potential to thrive as a result of the medical threats.
Direxion, an ETF provider active in offering leveraged and inverse ETFs, filed an application with the Securities and Exchange Commission on April 7 to list a Work From Home ETF under the ticker “WFH.” Rafferty Asset Management is the proposed adviser to the fund.
Thematic investing is growing in popularity, and the BioThreat ETF’s relatively diversified strategy is likely to appeal to certain investors, said Todd Rosenbluth, head of mutual fund and ETF research at CFRA, a forensic accounting and analytics firm. But he cautioned that such funds also are risky.
“Many of their likely constituents will be in early stages of growth and profitability, while perhaps also trading at a premium due to investor optimism,” he said. “A theme that makes sense in theory may not be a wise investment, particularly in the shorter term.”
A spokesman at Pacer, which is based in Malvern, Pa., confirmed the contents of the filing but declined to comment further on Rosenbluth’s observation or on its expectations for launch.
The Securities and Exchange has announced a number of steps easing certain reporting and related requirements for investment companies as a result of the coronavirus crisis, but has not specifically addressed its process for approving applications for new investment products during the pandemic that has required most of its staffers to work from home.
The Pacer BioThreat Fund listing warns investors that the coronavirus pandemic and other biologic threats are themselves potential risks to fund performance.
“It is unknown how long circumstances related to the pandemic will persist, whether they will reoccur in the future, whether efforts to support the economy and financial markets will be successful, and what additional implications may follow from the pandemic,” the prospectus says in its list of risk factors for potential investors to consider. “The impact of these events and other epidemics or pandemics in the future could adversely affect Fund performance.”
The Pacer BioThreat ETF would be listed on the Cboe BZX Exchange, if approved, according to the filing.
LifeSci, the index creator, also created Virtus Investment Partners’ Virtus LifeSci Biotech Products ETF (BBP). That fund began trading in late 2014 and now has $26.0 million of net assets.
Malvern, Pennsylvania-based Pacer ETFs had 23 ETFs and over $5.9 billion in assets under management, as of January 17, 2020.