You're probably well aware at this point of funds that try to "do right" by investing in companies that try to do right, by virtue of several environmental, social and governance (ESG) factors.
However, a brand-new ETF is taking a more, ahem, active tack.
The Simplify Health Care ETF (PINK), launched today, is an actively managed healthcare-sector offering that will be piloted by a longtime hedge fund portfolio manager who spent decades running healthcare equity portfolios. That will provide a rare active-sector option in a sea of mostly indexed products.
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But what makes PINK stand out even further is that most of what investors pay to be invested in the ETF will end up going to charity.
Get to Know PINK
Simplify Health Care ETF is immediately a rarity in its category in that it has a human being at the helm. ETF.com lists more than 50 healthcare-related exchange-traded funds, and the vast majority are index products – Cathie Wood's ARK Genomic Revolution ETF (ARKG) is among the most notable exceptions.
Steering the ship is Michael Taylor, who has more than 20 years of healthcare investing experience, including more than a decade at hedge fund Critical Mass Partners, as well as stints at Citadel, Diamondback Capital and Oppenheimer Funds.
Before that? He was a virologist who worked in drug development.
"The area he's really focused on is understanding the medical regulatory framework from drug and device approvals, understanding what cashflows for different drugs and devices look like over time," says Brian Kelleher, Chief Revenue Officer of ETF provider Simplify.
Past that, Kelleher says, Taylor will be attempting to generate alpha by identifying underpriced companies and concentrating assets in a small set of holdings.
PINK has launched with 50 holdings. That's slightly fewer than the 64 of the S&P 500-constrained Health Care Select Sector SPDR Fund (XLV), and a fraction of the hundreds of holdings boasted by other large healthcare-sector ETFs, such as the Vanguard Health ETF (VHT, 456 holdings) and the iShares Biotechnology ETF (IBB, 268). Instead, it's mostly in line with the 40-60 holdings that ARKG aims to hold.
No one will blink at the mid-single-digit exposure to healthcare giants such as Johnson & Johnson (JNJ), UnitedHealth Group (UNH) and Abbott Laboratories (ABT) – you'll find that in most broad-sector offerings.
But at launch, the PINK ETF does boast a higher skew toward health care equipment (at 36% of assets) than most of its contemporaries. It also stashes a little less weight in pharmaceuticals (20%) and biotech (12%), which nonetheless have significant pull on the fund. Life sciences tools and services, and health care services are among another half-dozen industries that round out PINK with single-digit exposure.
A Charitable Investment
PINK's other distinguishing feature: It allows investors to give to a good cause by simply tapping the "Buy" button.
Per the launch release: "The Simplify Health Care ETF, trading under the symbol PINK, will donate all net profits from managing the fund on an annual basis to Susan G. Komen." Komen is the nation's largest breast cancer research and awareness foundation, and has earned both a Gold transparency rating from GuideStar.org and a strong score of 82 (out of 100) from CharityNavigator.org.
Simplify's healthcare ETF isn't the first fund to be linked to a charity. Jay Hatfield, CEO of ETF provider InfraCap – whose products include InfraCap MLP ETF (AMZA) and InfraCap REIT Preferred ETF (PFFR) – pledged to donate 10% of gross revenue to Tutoring America, which Hatfield launched in 2017. And in 2015, Loncar Investments CEO Brad Loncar pledged to donate 4 basis points of annualized assets under management for the Loncar Cancer Immunotherapy ETF (CNCR) to the Cancer Research Institute. (A basis point is one one-hundredth of a percentage point.)
Still, PINK's offer of "all net profits" is worth noting – especially considering that Taylor is managing pro bono.
The fund isn't exaclty free. Investors still must pony up 50 basis points in annual expenses for access to PINK. That's less than the 75 bps charged for Wood's management of ARKG, and competitive among active funds, but still far more than you'd pay for most of prevalent passive sector strategies on the market.
However, while most of that higher expense would normally pay a manager's salary, Kelleher says that for "the foreseeable future," Taylor won't be taking a dime for running the fund. A few basis points of investor expenses will necessarily go toward listing, custody and other fees, but the "vast majority" will go to Susan G. Komen.
On top of that: Kelleher says that Simplify has promised to give at least $100,000 to the foundation in PINK's first year.
"So if we come out and it’s a total dud, the fund won't generate much revenue, but Simplify will cut the check regardless."
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