Healthcare is an epicenter of innovation, and some exchange traded funds put investors front and center when it comes to accessing that theme.
Count the ARK Genomic Revolution ETF (ARKG) as one of the most relevant members of that conversation. The $2.24 billion ARKG turns nine years old in October. While the ETF’s upside hasn’t always been accrued in straight-line fashion, it has, in hospitable market environments, developed a penchant for outperforming old guard healthcare funds that are typically heavy on less innovative companies.
Those factors are reminders of some important points. First, looking under the hood of healthcare ETFs is homework that needs to be completed. Second, there are risks and volatility that come along with embracing the healthcare innovation investment theme. However, there are rewards too, and ARKG has the potential to deliver them.
As its name implies, the ETF features ample genomics exposure — an important trait to long-term investors because at the industry level, genomics is one of the leading sources of healthcare innovation.
“Advances in computing power and machine learning have contributed to gains in genomics—the study of all genes that can be found in an organism—over the past two decades, giving scientists detailed information about the nature of human genes and how human bodies are built,” observed Morgan Stanley strategist Vijay Chandar. “Look no further than the rapid development of messenger RNA (mRNA) COVID-19 vaccines to get a sense of the impact. Increased attention on genomics may be a positive driver for the industry, potentially drawing more aggressive funding from governments and private investors.”
Other areas of emphasis featured in ARKG include diagnostics and precision medicine. Those concepts are often overlooked in the healthcare innovation conversation relative to biotechnology and genomics, but each is a compelling runway for long-term growth.
Exposure to diagnostics and precision medicine companies is all the more attractive for investors because companies in those industries are making strides in terms of early treatment options, driving provider costs lower and potentially boosting patient outcomes.
“Innovation in areas such as diagnostics, detection and patient care has also altered the industry. A growing number of companies are exploring tests that can detect various diseases in the early stages, including cancer, where a late-stage diagnosis is a leading cause of death. New blood tests that can detect early-stage cancer may lead to better patient outcomes, not to mention lower treatment costs,” concluded Morgan Stanley’s Chandar.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.