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Global X Launches GNOM ETF to Tap Booming Genomics Space

Sweta Jaiswal, FRM
For Sangamo's (SGMO) Q1, investor focus will be on its gene therapy candidate, SB-525, currently under evaluation for hemophilia A. The company also boasts several other early-stage promising candidates in its pipeline.

Growing demand for personalized medicine, solid investments and higher R&D activities will soon make Genomics the next big thing in the investing space. To gain exposure to this high-potential market, Global X ETFs recently launched the Global X Genomics & Biotechnology ETF GNOM within its Thematic Growth suite.  

GNOM in a Nutshell

GNOM seeks to track, before fees and expenses, the price and yield performance of the Solactive Genomics Index.

It is the 13th fund in Global X’s Thematic Growth suite that offers exposure to emerging economic trends. GNOM targets companies engaged in gene editing, genomic sequencing, genetic medicine/therapy, computational genomics and biotechnology.

Comprising 40 index holdings, GNOM is heavily-weighted toward U.S. companies (87.5% of total holdings) followed by Netherlands (7.4%), China (3.3%) and Switzerland (1.8%). Notably, biotechnology companies dominate the composition, followed by life sciences tools & services and pharmaceuticals. Having entered the market on Apr 5, it has gathered net assets of $1.50 million. The fund charges a fee of 68 basis points a year.

GNOM’s top three holdings are Genscript Biotech, Ultragenyx Pharmaceutical RARE and Illumina ILMN, with 4.4%, 4.07% and 4% exposure, respectively.

What Makes Genomic Testing an Attractive Space?

The global genomics markets have been favored by a streak of solid developments in sequencing, microarray, PCR (Polymerase Chain Reaction), Nucleic acid extraction and Purification techniques. Further, the implications of AI, cloud-based technologies and increased R&D focus have lent a competitive edge to companies with significant exposure to genomics.

In fact, going by a MarketsandMarkets report, the $18.9-billion global genomics market is expected to reach $35.7 billion by 2024 at a CAGR of 13.5%. It further states that North America accounted for the largest share of the global genomics market in 2018. Meanwhile, the Asia-Pacific region is expected to see the highest CAGR in between 2019 and 2024.

Growing investment in R&D activities for combating genetic disorders, contracting sequencing costs, and rising awareness along with increasing government initiatives are expected to keep driving demand in the space.

ETF Competition

The fund faces moderate competition owing to its high focus on U.S. biotechnology and genome companies. Below we discuss a few ETFs that seek to provide exposure to the genomic markets (see all Health Care ETFs here).

Invesco Dynamic Biotechnology & Genome ETF PBE

This fund seeks to provide exposure to U.S. biotechnology and genome stocks and tracks the Dynamic Biotechnology & Genome Intellidex Index. It has AUM of $284.4 million and charges a fee of 59 basis points a year. 

The fund’s top three holdings are Alnylam Pharmaceuticals, Illumina and Celgene with 5.7%, 5.2% and 5.1% allocation, respectively. The fund has returned 12.9% in a year and 16.9% year to date (read: Biotech ETFs Jump on Roche-Spark Deal).

ARK Genomic Revolution Multi-Sector ETF ARKG

This is an actively managed fund seeking long-term growth of capital. It has AUM of $434.1 million and charges a fee of 75 basis points a year.

The fund’s top three holdings are Invitae Corp, Illumina and Intellia Therapeutics with 9.8%, 8.9% and 7.5% allocation, respectively. The fund has returned 29.9% in a year and 41.1% year to date (read: Best Performing ETFs of the First Quarter).

iShares Nasdaq Biotechnology ETF IBB

This fund seeks to provide exposure to U.S. biotechnology stocks and tracks the NASDAQ Biotechnology Index. It has AUM of $8.29 billion and charges a fee of 47 basis points a year. 

The fund’s top three holdings are Gilead Sciences, Amgen and Celgene with a respective allocation of 8.2%, 8.1% and 8%. The fund has returned 6.5% in a year and 16.8% year to date (read: What's Behind the Biotech ETF Rally to Start 2019?). 

Bottom Line

GNOM charges higher than many of its biotech peers, though it charges less than ARKG. However, we expect the fund to amass considerable assets in the coming days owing to its more concentrated exposure to genomics.

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