Plenty of new exchange-traded funds are coming to market this year and many have something in common: Leverage to the coronavirus pandemic.
What To Know: That's been a boon for many of these rookie funds and it doesn't matter if that leverage is healthcare-related, tied to technology or driven by something more social and fun.
Of course, with new ETFs there are always slow starts, fast start and truly remarkable, bursting out of the gates starts. The Global X Telemedicine & Digital Health ETF (NASDAQ:EDOC) is in the latter category as it's barely more than two months old and already has nearly $349 million in assets under management.
Why It's Important: For ETFs with the thematic label, it doesn't get much better than that in terms of two months of asset gathering. Due in part to Teledoc (NYSE:TDOC) and Livongo Health (NASDAQ:LVGO), telemedicine investing is in the spotlight in a big way amid the coronavirus pandemic. However, the digital health/telemedicine wave was developing before COVID-19 started grabbing headlines every day.
“Prior to COVID-19, these technologies saw limited adoption as deeply engrained stakeholder practices proved difficult to disrupt. Yet as the pandemic unfolded, providers, patients, and payers quickly realized the benefits of telemedicine,” according to Global X research.
Obviously, patients still need care even during a pandemic. However, the coronavirus is prompting patients to look for ways to conserve costs while health care providers are increasingly motivated to deliver care without forcing patients into hospitals or offices. EDOC components help achieve those objectives.
“Patients could avoid the pandemic-related dangers of in-person visits and reduce costs by $19-121 per visit,” notes Global X. “From February to April 2020, telemedicine usage surged more than 30x, with related medical claims soaring from 0.4% to 13%.”
What's Next: What's critical with any thematic ETF, EDOC or otherwise, is that the underlying theme not have a finite shelf life. It's easy to be excited in a particular moment, but as enthusiasm wanes, so can returns delivered by thematic investments.
The good news for investors considering EDOC is that the fund is also a re-opening play and the telemedicine industry is still in its early innings of growth.
“We anticipate telemedicine playing a continued essential role in the Re-Opening Economy given the flexibility and safety it offers,” notes Global X. “In addition, telemedicine represents just one facet of health care’s digital transformation that should see broader acceleration as health systems seek to improve patient outcomes and improve efficiency.”