Tema ETFs believes life sciences are an important allocation in any portfolio. Yet despite its historical outperformance of the broader market, executing an investment strategy in this complex sector is not easy.
Tema ETFs believes life sciences are an important allocation in any portfolio. Yet despite its historical outperformance of the broader market(1), executing an investment strategy in this complex sector is not easy.
On the one hand, the sector is synonymous with contribution to advances in the health of society and the associated potential for financial rewards. The prospect of these advances may continue to attract investors, but an unsophisticated approach to biopharma might not result in a repeat of the last 30 years of outperformance(1.) Stock picking in this sector can be difficult for the non-specialist investor. Ever-evolving treatments and technologies, an intense competitive landscape and the many different disease areas create both opportunity and challenge. These opportunities and challenges are clearly evidenced by a broad dispersion of returns that are driven as much by science as by financial indicators. The cost of funding lengthy clinical trials and their inherent binary outcomes serve to underscore the need for experience and risk management.
This case study begins by evaluating the merit of an allocation to life sciences. History, population growth, valuations and M&A are countered by regulatory uncertainty, clinical trial risk, return concentration and funding risk. Innovation is both an opportunity and a challenge. It then reviews historical impact of clinical trials on company returns and how this shapes an active approach.
In Tema ETFs' opinion, the mix of risk and reward provides an opportunity for an approach that focuses only on the most promising areas of life sciences. This case study analyzes the creation of ETF strategies that utilize an experienced team, a rigorous process and a network of professionals with domain expertise. Download to uncover the:
Opportunity - What's the merit in investing in Life Sciences?
Challenges - What are some of the risks / challenges?
Targeted approach - Should investors be more selective in biotech today?
Active investment process - Can active management address the challenges?
Source: Nature, Nat Biotechnol 35, 1149-1157 (2017) (chart on slide 2)
Carefully consider the Fund’s investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fund’s prospectus or summary prospectus, which may be obtained by visiting www.temaetfs.com. Read the prospectus carefully before investing.
Important Risks
Diversification does not ensure profits or prevent losses.
Investing involves risk including possible loss of principal. There is no guarantee the adviser’s investment strategy will be successful.
Sector Focus Risk: The Fund may invest a significant portion of its assets in one or more sectors, including Engineering and construction, Financial Sector, FinTech, Industrials and Infrastructure, and thus will be more susceptible to the risks affecting those sectors than funds that have more diversified holdings across several sectors.
Specific Fund Risks:
CANC: Oncology companies are highly dependent on the development, procurement and marketing of drugs and the protection and exploitation of intellectual property rights. A company’s valuation can also be greatly affected if one of its products is proven or alleged to be unsafe, ineffective or unprofitable. The stock prices of oncology companies have been and will likely continue to be very volatile. The costs associated with developing new drugs can be significant, and the results are unpredictable. Newly developed drugs may be susceptible to product obsolescence due to intense competition from new products and less costly generic products. Moreover, the process for obtaining regulatory approval by the U.S. Food and Drug Administration or other governmental regulatory authorities is long and costly and there can be no assurance that the necessary approvals will be obtained or maintained.
HRTS: Obesity and Cardiology companies are highly dependent on the development, procurement and marketing of drugs and the protection and exploitation of intellectual property rights. A company’s valuation can also be greatly affected if one of its products is proven or alleged to be unsafe, ineffective or unprofitable. The stock prices of oncology companies have been and will likely continue to be very volatile. The costs associated with developing new drugs can be significant, and the results are unpredictable. Newly developed drugs may be susceptible to product obsolescence due to intense competition from new products and less costly generic products. Moreover, the process for obtaining regulatory approval by the U.S. Food and Drug Administration or other governmental regulatory authorities is long and costly and there can be no assurance that the necessary approvals will be obtained or maintained. Companies in the medical equipment industry group may be affected by the expiration of patents, litigation based on product liability, industry competition, product obsolescence and regulatory approvals, among other factors.
MNTL: Neuroscience companies are often subject to the potential or actual performance of a limited number of products or technologies and may be greatly affected if any of their products or technologies proves to be, among other things, unsafe, ineffective or unprofitable. Neuroscience companies may not be able to capitalize on such products or technologies. Neuroscience companies may face political, legal or regulatory challenges or constraints from competitors, industry groups or local and national governments. They are also subject to product liability claims, patent expirations and intense competition, which may affect the value of their equity securities. Neuroscience companies may be thinly capitalized, and their equity securities may be more volatile than companies with greater capitalizations. Neuroscience companies are also susceptible to the market and business risks of related industries, such as the biotechnology, pharmaceutical and health care equipment industries.
Investing in foreign and emerging markets involves risks relating to political, economic, or regulatory conditions not associated with investments in U.S. securities and instruments. In addition the fund is exposed to currency risk.
Tema Global Limited serves as the investment adviser to Tema Oncology ETF, Tema Neuroscience and Mental Health ETF, and Tema Cardiovascular and Metabolic ETF (the “Funds”), and NEOS Investments, LLC serves as a sub adviser to the Funds. The Funds are distributed by Foreside Fund Services LLC, which is not affiliated with Tema Global Limited nor NEOS Investments, LLC. Check the background of Foreside on FINRA’s BrokerCheck.
