Dual Impact ETFs Seek To Do Good
September 29 is World Heart Day. The day is meant to raise awareness about cardiovascular disease, including heart disease and stroke, which are the world’s leading causes of death. According to the World Health Organization, cardiovascular disease accounts for 31% of all fatalities worldwide. Much of these fatalities are preventable.
While socially responsible investing often focuses on environmental factors, there is even an ETF designed to bring awareness to this cause. The $7 million IQ Healthy Hearts ETF (HART) tracks a market-cap-weighted index composed of global stocks with favorable health-related ESG ratings.
Concentrated Portfolio
The top 10 names make up about half of the portfolio, which holds 81 stocks in total.
Chart courtesy of FactSet
(For a larger view, click on the image above)
Several pharmaceutical companies show up as top holdings, but tech names make up a big portion too. While some of these technology names might be surprising at first, their representation speaks to a growing consumer focus on wearables.
The Apple watch has heart monitoring capabilities, such as detecting high or low heart rate as well as irregular heart rhythms. And Google completed its acquisition of Fitbit earlier this year, bringing the wearable under Alphabet’s umbrella.
Other holdings in the portfolio include activewear companies such as Nike or Under Armour and food manufacturers such as Nestle and Kellogg.
(Use our stock finder tool to find an ETF’s allocation to a certain stock.)
Performance Limited But In Line
Since the ETF was launched earlier this year, its track record is limited, but in spite of the niche focus, the fund has performed in line with expectations given its global scope.
HART has underperformed the domestic SPDR S&P 500 ETF Trust (SPY) but significantly outperformed the internationally focused iShares MSCI ACWI ex U.S. ETF (ACWX). Performance has mostly tracked alongside the global iShares MSCI World ETF (URTH) throughout the year.
Dual Impact
The “dual impact” feature of this portfolio is relatively unique. Not only does the fund allocate to companies that meet the “healthy heart” theme, a portion of the management fee is also donated to the American Heart Association.
While NYLIM does not disclose the precise amount, the firm provided a statement saying: “Our ‘Dual Impact’ effort reflects our commitment to catalyze change both through our thematic investment approach in public companies advancing and improving heart health outcomes, and our ongoing support of the AHA’s Social Impact Fund, which directly supports local communities by helping to break down social and economic barriers to healthy equity.”
This is similar to another issuer that seeks to do good through their offering of ETFs, Impact Shares. These ETFs are aligned with social issues such as affordable housing, minority and women’s empowerment, and sustainable development.
Per Impact Shares’ website, all net profits (defined as the excess after deduction of operating expense and working capital reserve) go directly back to the nonprofit partners of the ETFs. The issuer’s largest ETF is the $94 million Impact Shares Affordable Housing MBS ETF (OWNS), which launched this summer.
Bigger Question
The bigger question that comes to mind when considering these ETFs is, what is more beneficial: aligning our portfolio with our values, or maximizing our investments and donating some of the proceeds to charities that are involved in on-the-ground initiatives?
With the growth of ESG investing this year, both in terms of funds as well as assets devoted to such strategies, issuers and investors alike seem to be interested in having their portfolios reflect their beliefs. (Read: ESG Related ETF Filings Flourish)
But charitable giving has been around since well before the concept of ESG. This too has seen great interest, with charitable giving in the United States reaching a record $471 billion in 2020. The increase in donations was driven by individuals as well as foundations, according to a report from Giving USA.
With the increase in both ESG investing as well as charitable giving, the underlying message is the same: People are increasingly interested in using their money to do good in the world. And dual-impact ETFs such as HART offer a way for investors to approach the issue in multiple ways.
With more dual-impact ETFs expected from IndexIQ, investors will soon be able to choose from additional social and environmental issues in an effort to make a positive impact with their investments.
Contact Jessica Ferringer at jessica.ferringer@etf.com or follow her on Twitter
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