Harbor Capital Advisors has launched a new active, fully transparent ETF, providing advisors the opportunity to invest in a pure play healthcare strategy.
The Harbor Health Care ETF (MEDI), listed November 17 on the NYSE, can be a strong solution for investors seeking either complements or alternatives to passive healthcare exposure, as well as for investors that are structurally underweight to the sector, the firm said in a statement to VettaFi.
“In addition, the health care sector has historically demonstrated defensive qualities vs other economic sectors given its lower cyclicality, making MEDI potentially attractive for investors that are worried about the prospects of a future recession,” Harbor said.
MEDI is sub-advised by Westfield Capital Management Company. Westfield’s rich history of healthcare investing across industries and the capitalization spectrum, as well as its experienced portfolio management team make the firm uniquely capable of investing in this inefficient, alpha-rich market segment, the firm said. MEDI’s lead portfolio manager, Westfield partner Matt Renna, has 18 years of investment experience, and the co-portfolio manager, Westfield president, CEO, and CIO Will Muggia, has 38 years of experience.
MEDI offers diversified, all-cap exposure to the healthcare sector across sub-industries, which may include biotech, life sciences, healthcare providers, and pharmaceuticals, among others. The firm maintains a high level of active share in a relatively concentrated strategy (38 names as of October 31, 2022) and attempts to capture the upside from the most innovative sub-sectors while maintaining quality through secular winners and buffering the downside in high beta sell-offs.
“MEDI will invest in development stage Biotechnology companies as we believe they represent some of the greatest opportunities for alpha generation,” Westfield said. “It is important to distinguish between two broad baskets in therapeutics – the commercial stage companies in which we see revenue generating assets, and the pre-commercial stage companies. It is the latter basket that requires the more pragmatic approach.”
Westfield said the firm tries to avoid single-asset companies as well as those that are in pre-phase two or the proof-of-concept stage. However, it will monitor these companies and come up with a framework that would enable a possible eventual investment — essentially a point in time and/or fact pattern that would warrant a favorable risk-adjusted return for investors.
Instead, Westfield focuses on post-proof-of-concept companies, particularly those that have multiple assets in the pipeline, to mitigate risk. “We look for companies who are well capitalized and who have a competitive edge for innovation,” the firm said.
“MEDI is currently exposed to what we think are some of the highest quality growth opportunities in Health Care, across all sub-sectors and across the market cap spectrum,” the firm said. “We believe we are positioned for a recovery in Biotech, Medical Technology, and Life Science Tools/CROs, and thus are optimistic in the short- to mid-term timeframes for significant alpha generation in the space. Longer term, considering the value that can accrete from innovation throughout the Health Care ecosystem, we think the space offers some of the largest opportunities for U.S. Growth investors.”
MEDI’s investment objective is centered around the belief that the portfolio management team can construct a portfolio capable of benefiting from the secular growth and innovation of the U.S. healthcare system while achieving alpha relative to the broader healthcare sector by investing in quality businesses with differentiated products, technologies, and services which meet Westfield’s disciplined valuation criteria.
Westfield is a long-term Harbor partner, having managed the Harbor Small Cap Growth Fund since 2000, a sleeve of the Harbor Disruptive Innovation Fund and the Harbor Disruptive Innovation ETF (INNO) since 2021, and the Harbor Dividend Growth Leaders ETF (GDIV) since its launch in May.
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