Market Overview

An Obscure Consumer ETF Could Shine

An Obscure Consumer ETF Could Shine

As the exchange-traded funds industry has aged, issuers have introduced increasingly focused plays on well-known sectors and industries. The consumer discretionary sector, the fourth-largest sector in the S&P 500, has its share of unusual ETFs, including the Global X Health & Wellness Thematic ETF (NASDAQ: BFIT).

BFIT, which debuted in May 2016, follows the Indxx Global Health & Wellness Thematic Index. The ETF is designed to give investors exposure to “high growth potential through companies at the leading edge of a long-term, structural trend affecting multiple sectors of the global economy,” according to Global X.

To this point, BFIT has failed to gain a following with investors, but that belies the impressive long-term trends underpinning the ETF's investment thesis.

Important Trends

An often-cited point by long-term healthcare bulls are the favorable demographic trends for the sector, including aging developed world populations and increased life expectancies.

“By 2025, the world’s average life expectancy is expected to reach 73 years,” according to Global X research. “This is up from just 65 years in 1995, meaning that over a mere 30 years, advancements in medical care and greater access to nutrition will have added an additional eight years to the average person’s lifespan. In addition to this increased longevity, birth rates are expected to steadily decline, with births per woman falling from 2.5 from 2010 – 2013 to just 2.0 by the end of the century.” 

At first glance, BFIT may appear to be a healthcare ETF, but in reality, it is more of a retail/consumer discretionary and consumer staples fund. BFIT allocates a combined 55 percent of its weight to apparel makers, footwear providers and packaged foods companies. The ETF holds 67 stocks.

A Better Bet

Some of BFIT's holdings are considered brick-and-mortar retailers, but the ETF is avoiding this year's repudiation of those stocks. BFIT is up more than 9 percent year-to-date compared to a 12.7 percent loss for the SPDR S&P Retail ETF (NYSE: XRT).

Improving trends in healthcare priorities could bode well for BFIT over the longterm.

“Another powerful theme is the emergence of people prioritizing health in their everyday lives,” according to Global X research. “Rather than simply treating symptoms as they occur, individuals are increasingly taking a proactive approach to improving their overall health as part of a holistic approach to medicine. They are doing so by eating healthier foods, engaging in regular exercise, and managing stress through meditation or yoga.”

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