First Trust has launched a new thematic equity ETF in the US providing exposure to fast-growing companies operating within technology-enabled segments of the healthcare sector.
The ETF seeks out fast-growing companies across disruptive healthcare sectors.
The First Trust Nasdaq Lux Digital Health Solutions ETF (EKG US) has been listed on the Nasdaq Stock Market with an expense ratio of 0.65%.
Ryan Issakainen, Senior Vice President, ETF Strategist at First Trust, said: “The healthcare sector is leveraging technology in new and innovative ways that have the potential to both raise our standard of living and improve patient outcomes.
“We believe EKG will appeal to investment professionals seeking exposure to some of the most innovative stocks at the intersection of health care and technology.”
Methodology
The fund is linked to the Nasdaq Lux Health Tech Index which was developed by Nasdaq in partnership with Lux Capital, a venture capital firm focused on emerging science and technology industries.
The index selects its constituents from a global universe of stocks with market capitalizations above $500 million and average daily trading values greater than $3m.
The methodology first harnesses Lux Capital’s proprietary classification framework to screen for companies deriving significant revenue from disruptive healthcare industries including medical and surgical devices, clinical diagnostics, healthcare productivity software, telemedicine, genomics, wearable health monitoring devices, proteomics, laboratory services, and online healthcare platforms.
From this narrowed universe, the index selects companies that have exhibited annual revenue growth of at least 10% in each of the two previous fiscal years.
Constituents are weighted by float-adjusted market capitalization while capping the weight of each of the five largest stocks at 8% and the weight of any other stock at 4%.
The index is reconstituted and rebalanced on a semi-annual basis with buffer rules helping to limit unnecessary turnover. Specifically, existing constituents with market capitalizations above $50 billion will remain in the index if they have reported annual revenue growth of at least 7% in one of the past two fiscal years.
Peter Hébert, co-Founder and Managing Partner of Lux Capital, said: “We’ve spent years obsessed with deep technology innovation taking place at the intersection of industries. As we’ve seen recently, the incredible advancements and acceleration in healthcare technology are meaningfully impacting society. We apply a similar level of analysis to the selection and monitoring of companies within the index, and we look forward to seeing our methodology reflected in this ETF.”
Cameron Lilja, Vice President and Global Head of Index Product for Nasdaq, added: “We are seeing rapid innovation and digital transformation in the healthcare industry, exacerbated by the Covid‐19 pandemic. These technological advancements have the potential to improve the quality of healthcare services and enhance the industry’s ability to deliver healthcare to the individual. Our index offers investors a unique and compelling solution for tracking this highly relevant and exciting theme, and our work with Lux and First Trust provides access to this theme for the investing public.”