Satrix is listing a new global healthcare ETF on 26 May and it is currently in IPO until 17 May 2022, buying in IPO means no trade or spread costs so a small saving.
What I do like about this index being tracked (and it is a feeder fund) is that is not dominated by the pharmaceutical companies. Rather biotech is the largest sector at just over 35% with pharmaceuticals making up just less than 10%.
STXHLT sectors
The investment case for healthcare is simple, ageing population and advancing technology. They both drive each other forward and drive profits for the industry. The risks are high R&D costs and government regulation. The latter is a real concern as healthcare costs global have been rising well ahead of inflation for at least two decades.
The Satrix ETF is dominated by US companies at 70.8%, but healthcare really is global so the markets these US companies sell into will be literally all over the world.
There is also the Sygnia healthcare ETF that was listed in August 2021 and this ETF is much more concentrated in pharmaceuticals. My concern about this segment of the healthcare market is that drugs are always at risk of regulation as prices increase and they also have extremely high R&D costs.
My preference between the two would be the new Satrix Healthcare ETF with reduced pharmaceuticals weighting. But if you want more pharmaceuticals then the Sygnia is better. That said even a blend of both would also work well with very few cross holdings in the top 10.
Satrix healthcare ETF
- Code: STXHLT
- Underlying index: STOXX Global Breakthrough Healthcare Index
- Target TER: 0.6%
- Number of stocks: 190
- Top 10 holdings % of NAV: ±12%
- Tax-free: Allowed
- Dividends: Total return
STXHLT top 10 as at 31Mar22
Sygnia healthcare ETF
- Code: SYGH
- Underlying index: Solactive Developed Markets Healthcare 150
- Target TER: 0.5%
- Number of stocks: 150
- Top 10 holdings % of NAV: ±30%
- Tax-free: Allowed
- Dividends: Semi-annual distribution
SYGH top 10 as at 31Mar22
ETF blog
At Just One Lap, we are big fans of passive investment using ETFs. In this weekly blog, we discuss ETFs on the local market and the factors you need to consider when choosing an ETF. If you have wondered how one ETF differs from another, this is where you can find out. We explain which index each ETF tracks, what type of portfolio could benefit from holding each ETF, and how the costs will affect your bottom line.