Taking a plunge into the healthcare sector when it’s fighting with a huge image problem requires courage. Moreover, when the investment product targets the biotech sector – which recently witnessed a big sell-off amid a raging drug-pricing controversy, questions are bound to be raised about the timing.
But for Brad Loncar, the Kansas based former budget manager in the international affairs division at the US Department of Treasury and a full-time biotech investor for over eight years, the time was ripe to give investors access to a very hot slice of the biotech sector – cancer immunotherapy.
For the uninitiated, immunotherapy involves manipulating the human body’s immune system to target and kill the cancerous cells, malignant or otherwise. Since the body’s own defence system is activated against carcinogenic cells, immunotherapy is far more potent and safe than traditional surgery and chemotherapy. Indeed, immunotherapy products can bring revolutionary breakthroughs and bring a paradigm shift in cancer treatment.
Hence, the newly launched Loncar Cancer Immunotherapy ETF (CNCR) could certainly break new grounds in the biotech ETF sub-segment. Many investors who find the generic biotech ETFs too broad and confusing, and would rather like to focus on a specific segment of the expansive spectrum instead, are likely to find CNCR attractive.
CNCR follows the proprietary Cancer Immunotherapy Index, developed in-house by Loncar Investments, to track the performance of leading large – and small-cap companies in the field of cancer immunotherapy. The index constitutes of US’ top seven large-cap pharmaceutical stocks and 23 biotech growth companies; all the 30 stocks in the portfolio are weighted equally and balanced semi-annually.
Equal weighting ensures smaller companies have the same impact on the fund’s performance as do their much larger peers. The fund contains such household names as Pfizer, Merck and Bristol Myers Squibb to little known names that include Ziopharm, Oncothyreon and Adaptimmune.
Loncar’s index is even more focused than the relatively narrow approach taken by some existing ETFs, such as the the BioShares Biotechnology Clinical Trial Fund (BBC). Growth biotech companies contribute more than two-thirds (72.4 percent) of weight to CNCR’s overall weight while large-cap stocks make up for the remaining 27.6 percent.
Since earnings of clinical-stage biotech companies could be volatile, investors better view the new product as a tactical addition to their core holdings for generating that elusive positive alpha.
CNCR has an annual expense ratio of 0.79 percent.
Disclosure: No holdings