Analyzing Tema ETF’s Cardiovascular and Metabolic ETF (HRTS): A Novel Investment Opportunity with Pros and Cons


The Cardiovascular and Metabolic ETF (HRTS) by Tema ETF, introduced in November 2023, offers investors exposure to the cardiovascular diseases and diabetes therapeutic market. Managed actively by seasoned stock picker David K. Song, MD, PhD, CFA, the fund adopts a bottom-up strategy, selecting 30-60 stocks that are expected to outperform. With 42 holdings across various companies and therapies, HRTS positions itself to capitalize on the growing anti-obesity drug market and the expanding cardiovascular spend.

Benefits of investing in HRTS include tapping into the unpenetrated and large market potential, potential growth from innovation, active management for better prospective returns, and being uncorrelated with overall market returns, as individual holdings depend on clinical and commercial success rather than macroeconomic factors.

However, there are drawbacks to consider. The cost is a significant factor, with HRTS carrying a net expense ratio of 0.75%, covering active management fees. The ETF has a limited track record, making it challenging to demonstrate its ability to outperform a basic healthcare index. Additionally, the higher risk associated with speculative holdings may pose a challenge, although the diverse set of holdings helps mitigate some of the risks.

HRTS provides a novel avenue for exposure to the growing cardiovascular and diabetic therapies market. Investors seeking to leverage industry tailwinds and trusting in David Song’s expertise may consider allocating a small portion of their portfolio to HRTS. However, given the absence of an established track record, investors may opt to stay on the sidelines for now, especially considering the higher associated costs.

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