Bolstered by positioning that includes exposure to companies fighting the coronavirus pandemic, the Principal Healthcare Innovators Index ETF (BTEC) is a pleasant surprise among healthcare exchange traded funds this year. Many market observers remain bullish on the healthcare sector’s prospects for 2021. BTEC’s good fortune could just be getting started.

BTEC seeks to provide investment results that closely correspond, before expenses, to the performance of the Nasdaq Healthcare Innovators Index. Under normal circumstances, the fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of companies that compose the index at the time of purchase. The index uses a quantitative model designed to identify equity securities in the Nasdaq US Benchmark Index (including growth and value stock) that are small and medium capitalization U.S. healthcare companies.

Election year uncertainty that often plagues the healthcare sector will soon be off the table.

“Rather than any large-scale transformation of the healthcare system, we see potential for only incremental changes – those achievable through a combination of executive orders and Medicaid/Medicare authority,” according to BlackRock research. “Add to this the immediate need to focus on pandemic response, and that leaves little political capital to take on complex health policy changes, particularly as hospitals confront COVID-19 challenges and vaccine development and dissemination remain a priority. On balance, a largely stable policy picture should be a positive for investors in the healthcare sector.”

Healthcare Poised for ETF Gains in 2021

BTEC also offers exposure to the innovative side of the healthcare sector, and that includes more than just vaccine developers.

BTEC YTD Performance

The fund has some exposure to the telemedicine & digital health theme. As far as its underlying indexing criteria, the fund connects physicians and patients digitally, facilitating a range of medical activities that include diagnosis, treatment, and medication management, as well as offering online pharmaceutical services, and/or providing internet healthcare platforms (“Telemedicine”).

“The coronavirus crisis also accelerated innovation in healthcare services, particularly in telemedicine and in-home care,” notes BlackRock. “A six-fold increase in the use of telemedicine services in the first half of 2020 is just the start of what we see as an enduring trend. Hospitals and physicians are increasingly investing in telehealth capabilities, and consumers are warming to this model of care. We see ample room for further adoption after what had been a slow start prior to the pandemic.”

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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.