Robots and the Future of Health Care

or a little robot dog. It looks like it's from Minority Report, like going up and down into parks and monitoring people, and it really kind of it's freaks you out in a way, but it also excites you. Um. I guess having seen at a lot of movies in the eighties, you can't imagine a world where robots are a big part. So I think the robo theme really captured the imagination of people. And that's what a theme etf had to do. It can't just outperform, it also

has to capture the imagination. And so this firm put out Robo had a big hit, and then they started making some other e t F s, and it's a great story because the other e t F s are also futuristic in design and really speak to both interesting themes we can discuss as well as the way E t F fishers, you know, try to navigate a tough market with product design launches and keeping up the assets in in you know, their existing hits. So what's the

company and who's our guest. The company's Robo Global and they would be you know, we've talked about that that term indie independent. They are classic indie issuer. And the guests today would be Nina Deeca, who's a senior research annelist over there. So she's kind of like we had Paul by Aki on a lot of e t F fishers have hardcore knowledge specialists to help answer advisor questions on these strategies, and that's what she does this time

on Trillions Inside Robo Hi, Nina, welcome to Trillions. Hey, how are you? Thank you so much for having me on your show today. Thanks for joining. So we've spent a little bit of time here talking about robo um, which will I think we'll talk a little bit more about. But you specifically work on another E t F which is called h tech. What's that's right, that's our Healthcare Technology and Innovation Index that trades as an a t

F globally. We've got a trading on two exchanges and it's been live for over a year UM and it is basically our compilation. We we follow a similar methodology to the Robo et F as you just mentioned, UM, where we use fundamental research to choose the best in class companies that represent all the disruption happening in healthcare over the next five to ten years. We look at areas such as robotics, virtual care, gene c guincing diagnostics,

precision medicine. These are all the areas that we think are being very much transformed and and have offer a wide breadth of investment opportunity. Eric has been a pretty good year for them. Yeah, I'm just looking at the performance now. I Mean, we talk a lot on the show about how flows go one of two places, dirt cheap or shiny objects. And robo makes the shiny objects, and h tech is in shiny object mode. It's up fifty since launching in June. That's double XLV, which is

the Healthcare ETF. It's even greater than XBI, the biotech ETF and for perspective, the market was about so, um, this is a real performance surge here and it's got about sixty million in assets, So that tells you how hard it is. You've gotta you've got to sustain this performance for a little while to get you know, into the big asset numbers. But mina, what's behind the performance? Like which part of those things you just mentioned is

driving that return. There's a bunch of things. One, as you mentioned, the things that I just mentioned are driving diversity in in our portfolio offerings. So rather than just looking at one area like telehealth or just genomics, we're looking across the board at the a lot of different areas including diagnostics, precision medicine, et cetera. And so what you what you the advantage of that is you get

to capture the growth that's happening. Um And when one thing is in favor, others might fall out of favor. But by having that diversity, it shields you from the volatility that's happening. Mind you, these are largely growth stocks. In fact, um about half of the index are our companies that are less than ten billion dollars in market cap, So, talk to us how you go about building an index like this, What what was the what was the blank white slate that you sort of started with here, and

how did you go about executing the strategy? I mean, so the template was robo. We had six plus years of proven success. And what we did with Robo is we looked at not just whose driving innovation in robotics, automation and AI, but the picks and the shovels that are also enabling companies to have robotics, automation and AI. And one of those areas that we focused on in robo was healthcare. We saw so much disruption happening in

that area that it warranted its own strategy. So, like I said, last year, we launched h Tech, which focus exclusively on healthcare innovation, and we said, what are the areas and we came up with our own proprietary list of um so as I mentioned, lab, automation is one, diagnostics, UH, precision medicine, telemedicine, and and we said these are the

nine areas that we believe represent the most disruption. Now it's not just enough to say, okay, we're going to look at genomics and then do a Google Search and just put all the genomics names in here. We actually went through all the companies and chose which ones we

believe our best in class. They have to be market leaders, technology leaders, and they also have to uh follow some financial criteria of ours strong balance sheet um uh they can't break various criteria in terms of ev sales and UM. And then the debts evada ratio are important criteria to us as well. And how do you how do you go about figuring out what the waitings are going to

be across those nine categories? We haven't. Interestingly, we have a scoring system and I'll have to show it to you sometime, but it's it's a it's a pretty in depth intranet that we have where every single company in our universe that we analyze has a score UM. There are several thousand actually that we that we do conduct fundamental research on and through that methodology, the ones that mind up with the top scores are the ones that

get included in the index UM. And then we've got a quarterly process where we rebalance, so we actually trind the outperformers and we add positions to the underperformers because again we're looking at the long term here, and for them to have even made it in the index means that we're looking at their growth out of the next

at least five years. So UM so it does help maintain that we're always buying low and selling high, and and then at that quarterly time, if there is a new company that we want to introduce to the index or one that needs to get kicked out because it no longer meets our criteria, we have an extensive review process.

We have a team of ten advisors who are world renowned experts in the fields in which they operate UM, such as the founder of Amazon Robotics and the director of AI at M I T. These are the people that we also work with UM to help decide which companies belong in the index. One thing I would be curious about to know is when you're talking to advisors about a product like this, Clearly it's a little more volatile than XLV because it's it's gonna have smaller stocks

and the waiting is such that there's more volatility. How do you use it in a portfolio? Like? What does this replace? Is this sort of like the hot sauce that you just use a little on top to maybe give your portfolio a little extra seasoning, or is this replacing something bigger? It's it could actually be complementary. So you mentioned earlier how you think you find the world of robotics and innovation very interesting, and a lot of

people might think they already have exposure to that. Same with healthcare UM a lot of investors are like, I already have healthcare more portfolio. But you mentioned earlier the performance of h tech UM compared to some of the largest UH index is traded in the world for healthcare and and there's a huge difference. So when you look at the underlying assets within the e t f s, what you'll find with ours is that there's or less overlap between our healthcare index and comparable indices, as well

as our robotics index and comparable indices. So UM So if you're looking for exposure to healthcare innovation, it's not enough to just say you have healthcare in your portfolio. You want to specifically look at the underlying assets, and so with ours, if you want that diversified exposure to these cutting edge areas, UM, h tech is probably a strong area to be adding and complementing your existing portfolio.

So some people like I already have biotech al right, Well, we have like less than of our portfolio would be names that you would even fall into that category. And yet even within those companies, we might have names that are not already in your portfolio. In fact, when you look at someone's uh typical investment strategy around healthcare, you'll find that they're most heavily weighed in large cap pharmaceutical and healthcare services companies managed care. We have hardly any

exposure to large cap pharma and managed care. So I want to put you on the spot a little bit, your Nina, because has been UM an interesting year to say the least. And I'm curious sort of what the h tech portfolio look like pre pandemic, the before times if you remember those, the quaint before times too. Now, how how was how was the product changed over the

course of the year. Interestingly, when so you mentioned our performance over the last twelve months, and it's also it's also done UM performed pretty well over thirty year to date, and and so it's not just the pandemic that has accelerated the index performance or hurt it UM. And so when you take a step back and you think what's what's driving um the markets in general. Oh, we've got the elections, we've got the vaccine, we've got the risk

around no one traveling anymore. But interestingly, healthcare innovation tends to be resilient to a lot of those themes because, um, people need healthcare and they need healthcare innovation regardless of what's going on. So just case in point, if you look at new healthcare legislation over the last five to ten years, it's been pro innovation, and a lot of

the new legislation that's been passed was bipartisan. So it's not that it didn't matter who was going to be in the White House after this election season, um, but it's it's just that a lot of these themes are supported by all sides. Nobody's arguing that we shouldn't detect

cancer earlier or telehealth earlier. So that's one component of it. UM. Regarding the pandemic, if you looked at the headlines in March and April, you probably saw every other day a new company that was working on a vaccine, for a new company that was working on diagnostics um or I shouldn't say a new company, but an additional company and what I want to say is that we already had a lot of those in our portfolio, because when you only select the leaders and the best in class companies,

you tend to be already be well positioned for when something like a pandemic takes place. So we already had um quite Dell in our portfolio. For example, we had backed in Dickinson and so because we already did the homework to say these are the people that are best positioned for growth and innovation, it's no surprise that they were also the best position to be the first to market with the covid test um. Maderna we added in March, and they had just announced that they were going to

start a clinical trial for their m RNA vaccine. That's not why we put them in. There's always a risk around that, and we're not looking for near term events. We brought Maderna in because they have over twenty other UH drugs in clinical trials right now, ten of which are vaccines. They're working on HIV, RS V CMB, They've got so many other diseases that they're working on, and they're using AI in every facet of what they do

in their research and development process. That's why Maderna was able to come up with the COVID vaccine so quickly, and that's what qualified them for the h Tech Index. So when you stick to the methodology and you pull in these technological innovators first, then when something happens that's big and market moving and thematic um, you tend to be well positioned for it. So so I'm also really interested, Um, I'm really interested in another person in the et F world,

Cathy Would, who's had just an insane year. And one of the things that you realize when you look inside Cathy's products, especially arc Um, is that Tesla has a ten percent waiting right. She's been extremely bullish on Tesla and as she said on on Trillions before you know it's it's a it's a long term position, but she will actively trade that stock throughout the course of a

quarter even um to try and maximize performance. And I'm wondering, you know, your largest holding at the moment is around two what do you what do you make of a Cathy Would style strategy and and and why why not have something that you're you're more more bullish on than just a two percent waiting Our methodology across our in disees is a modified equal waiting because parts of our fundamentals is that we believe in diversity and and diversified exposure.

As you recently saw with the Fiser renouncement about their vaccine and and the ninety scent efficacy, and all the diagnostic stocks that had the COVID test took a hit because people thought we're not going to need COVID tests anymore. Well, um H tech did not take that big of a hit. And and that's just one example of one day's news. So when you're dealing with innovation for us, for our methodology, we want to offer that diversity because no one company

can pull down the whole index. And so when someone's looking for a long term investment that they can kind of set it and forget it and let us do the groundwork. Um there, there's a little bit less for them to worry about on a day to day or

even on a year to year basis. UH. And not to discount what ARC is doing, because those are brilliant strategies, but they are quite different from ours, which once again takes me back to how our strategy could be quite complementary to some of the other products that are out there. So just to fall up on one point you said while you guys were talking, I looked at the overlap between h tech and XLV because a lot of investors are going to use XLV probably or have in the past.

That's the big healthcare spider, And it looks like there's only overlaps, so there's definitely a lot of original I think the droll the the waiting where you have much more parity between the top weighted and the lowest weighted that does sometimes give some m and a pop, whereas if you overweight a couple of stocks, you're not going to feel the smaller stocks that much. But um, I

think this one looks designed like a classic theme. Um. With that said, you know, just because you're in a position of research, is there one or two things about the future of healthcare that gets you excited? Like, could you take us into the like hospital or the doctor's office and explain something we're gonna see in like ten years that like would blow us away. Sure. Well, one thing that's already blown everybody away this year is telemedicine

the doctor patient visit. Because even a few years ago I used to run surveys on the cell side of of adoption to try to gauge are people interested in having a video visit with the doctor? And the vast majority of the people didn't even know it existed and certainly didn't even want to try it. Now people prefer it because once you try something that's easier, cheaper, you don't have to leave your house, you don't have to

leave the office. Um. Once you had exposure to it and you see how how easy it is to do, you're more likely to do it again. Telemedicine is only one small aspect of a bigger theme known as virtual care, and in the next five to ten years, virtual care is going to underlie every facet of healthcare. So when we talk about doctor patient visits, uh, tele ADOCT for example, just reported that their visits are up three times your

year over year. Um, that's just one small component. When we talk about virtual care, we're not just talking about doctor patient visits. We're talking about doctor to doctor communication, patient to patient communications. So patients are bringing in their families, UM, device to doctor, device to device, patient to device, and

that acquires a lot of underlying infrastructure. Teleduct, a company in the h Tech indexes really well positioned to capitalize on that theme through their acquisition of in Touch, which is one such or company that provides this underlying software infrastructure that can help enable all of this connectivity even in the o R. Like in Touch hasn't a partnership

with Intuitive Surgical that helps UM a physician. I'm not sure if you're familiar with how surgical robotics works, but when you are, when you're the surgeon and you're conducting a robotic assistant surgery, your head is looking inside of a console. UM, and like think about virtual reality types of things, So your your head is looking inside of a console. And then to look at other devices and gather other data during the procedure, you have to pick your head up and look around and look at some

other device or application. UM. With in Touch and their integration capabilities, they're working on bringing some of that visibility into the council, so it's one less thing that the physician has to look for. And so that's that's just one small example. UM. We can also see you examples of telerobotic surgery. UH. There's a physician Dr Patel in India that's already conducted at least five telerobotic surgeries from

twenty miles away. This is really interesting to me. So, uh, you're saying that, let's say Joel is in Brooklyn like you are. You both are, and he doesn't want to travel because of COVID, and I'm the doctor in Philadelphia. I can actually operate on him via a robot. That's right, that bet that That's what I was just gonna say. So that technology is just on the cusp of adoption. It's still an innovation, it's still very early days. But with wide adoption of five G, that's going to enable

the further practice of that. And and I'll take your example one step further. Um, that's great that someone from Philadelphia can operate on people in Brooklyn, but the worldwide implications are far greater in that someone in a large city, world leading uh cardiologists can operate on somebody in the in the far corners of the earth who might not

otherwise have access to that level of care. And so when we talk about the most exciting things happening in healthcare, we're looking at improving access to care at a lower cost and also at a higher quality. And so if we can get people uh, world class cardiologists to to conduct their procedures who otherwise might not have had access. That's going to be a huge improvement and we have a massive runway of growth for that. So when we talk about virtual care, we talk about their large runway

for growth. Don't just think about doctor patient visits. There are just so many more things that can be happening. UM. There is one other area where we can reach people in the far corners of the world everywhere, and is with early cancer detection. Today, about the people who are diagnosed with cancer are diagnosed in this community setting, whereas the genetic testing and the more sophisticated tools are all being done at university medical centers. UM. But that's only

affecting like of the population. And so how can we get more people access to those types of tools and technologies. Enter the world of early cancer testing. And you talked

about M and A earlier. We've seen an explosion of M and A in just the last couple of months with in VTA acquiring archer d x um, Aluminous announcement of Grail Exact Science as announcement of thrive UM, we've already seen ten billion dollars worth of M and A happened in very recent months due to this upcoming anticipated seventy five billion dollar market opportunity for early answer detection and and that that is one of the most exciting

things right now. And each tech definitely has exposure. Every company I just named is in the H Tech index seld This. This is really interesting to me because traditionally active management meant you go over the same five hundred stocks and try to find an edge. And that is where I think some money are flowing out of that style, and where it's flowing to is things like factor quant now e t f s and these themes. You can

see the appeal here. I'm gonna go core, cheap beta, and then I'll add a little H tech to try to ride something that's you know, potentially going to work for me in the future. But that said, these are a little more volatile than the sort of stockpicking active mutual fund. But to me, this is the new evolution

of active you know, I'm I'm really curious. Part of what you're describing there with the early cancer detection is, you know, there's another theme here in the background, which is, um, we're seeing a baby boom generation only older, right, And I'm wondering how much that factors into sort of the companies that you're talking about and their strategies or is it truly a more universal approach where because health care might have implications for somebody who's a baby boomer, but

it also could have implications for those of us who are you know, a little bit younger than that. So no, your spot on what are the reasons why? So when we talk about thematic investing, there's UM, there's there's often an emotional aspect. People feel like they want to do the right thing and invest in an area to maybe diversify their portfolio, to to help them feel like they're investing in areas that are um, good for the planet

or good for society. And one of the favorite things about my job is that health care innovation meets that it checks that box, but no one's arguing that it's actually happening this this is not a fad, right, So UM like, for example, the early cancer detect and then I just talked about UM. Only a third of cancers today are detected in stage one in stage two, but

that's when it's the most treatable. And if you can identify someone's cancer in the earlier stages and estimated hundred thousand lives could be saved every year in the US alone. That's you know, I think about this around the upcoming holiday season. That's a hundred thousand people who are going to be sitting at the holidays at dinner and and and and and enjoying their meals with their family every year.

And so when you think about that, it kind of checks that that we need to do this box And there's no one arguing that this isn't here to stay, and that it's actually happening, that it's coming because billions of dollars are being are flowing into this from a research and development standpoint, and it has to happen. And the technology is here. So if the technology is here

and the need is here, it's going to happen. You threw out a number there that I just wanna dwell on for a second hundred thousand figure, which made me just think of, you know, this has been such a tragic year. We've lost hundreds of thousands of Americans now um, millions around the world, UM. And I'm just curious, you know, like, you know, we've had this fiser news that you mentioned earlier.

We hope that there's a vaccine uh that has distribution, maybe by end of the year, we could start seeing it hopefully early next year. I'm just curious. You know, there's there will be a um a post COVID reality that will eventually get to and I'm wondering what you would expect to happen um UH to h tech in that post COVID world. How much of you know, the inflows that you've even seen this year has just been COVID becoming such a dominant theme in making people be

thinking about healthcare. Well, it's a great question, and that's the other reason why I bring it back to our core methodology. Maderna, for example, we didn't bring them in because of the COVID vaccine. We brought them in because of the twenty other innovative m R and A technology

needs that they have in the pipeline. Keep in mind that in particularly in gene therapy, when something new gets approved, it's a positive catalyst for all of the other players in this space, and Madurn is very well positioned to capitalize on that. So we get one MR and a technology that works and gets FDA approved, and and these guys have this rich pipeline to continue to grow and in a vast runway for growth in all these other therapeutic areas. For years, I wish we could play sticks

the Mr. Roboto song. UM, big fan of that one when I was a little kid. But anyway, Robo was robos. You know the reason you're here. I think Robo put you guys on the map. It was in your first launch and you're in a bit a big hit. Most firms don't. Aren't that lucky. It went to two point five billion down to one point five billion now because you inspired all this competition. There's bots. Black Rock got into it. I think there's a leverage GT if that's how you know a product is a big hit when

there's a two x version. Anyway, Um, it's it's cooled down a little this this area, but it's this year it's pretty good inception. What's the latest in the robotics market? And I guess maybe take somebody through who all they know is maybe you know, uh, the vacuum cleaner that goes around the house or the Boston Dynamics video of the robot doing a flip. What else is in the portfolio that that you're serving up here that is, you know,

exciting about robotics. So so you bring up some great examples and UM, we basically break it down into areas including computing, processing, AI, UM, sensing, integration. UH. Robo is very well positioned to capitalize on because of our presence and logistics and annovation. The very fast growing world of e commerce is on fire. UM. We've got three D printing, we've got consumer ad US, we've got healthcare, food and agriculture. So we're diversified across all these areas where there's some

very exciting things happening. You mentioned the some historic outflows and yes, we do have UH inflows coming back in and and largely tied to the strong performance. UM. You also mentioned another one bots and UM, I'll say that, UH, it's a totally different methodology. We have less than overlap with that index. That strategy uses a market cap waiting UH they have an average market cap of sixty one billion versus robo, where we're more focused on those upcoming players.

UM are we haven't our average market cap of of bill and so these are smaller companies, they're more up and coming, and they're really well positioned to capitalize on some of these things that you just mentioned UM autonomous

vehicles for example, UM uh drone capabilities. These are all areas where we're paying close to event, close attention, and so our advisors and so we want to make sure that we're on the cutting edge UM and looking back someone someone's going to say, wow, this no one had even heard of this a few years ago, Well, chances are we might have already had the tools and the

parts enabling that innovation already in our index. So it's it's it's a place to be if you want to be present before everyone else hears about it and it becomes fully widely adopted. You know, I want to ask um uh just about think because that's uh your your latest launch. What's what's the strategy and the vision there? Sure, so similar methodology fundamental analysis is deployed, and now we're

looking at a smaller group of companies UM. So we whereas we have over e d companies with the robo and H tech indexes E, T F, S, M, think, Tooker, TH, H and Q has fewer than seventy I believe, and UM and we're looking at specifically across two different areas applications and services as well as infrastructure UM and within that we're looking at areas such as consumer healthcare, factory automation,

cognitive computing, semiconductor, and then big data and analytics. And specifically we're looking at companies who are using AI meaningfully in a way that is going to drive their growth and UM and that they're offering some sort of cutting edge leading disruption. It can't just be that they happen to have a i UM that's that's helping with one of their business processes. And you know, Nina, I gotta follow up on the Boston Dynamics. This is this company.

I don't even know, you know what else they do, but they put out these videos that always go viral and it's a video of a literal robot doing like a front flip and going. One of them was opening a dishwasher and emptying the dishes. Another one was at a park. And sometimes they're they're either scary and exciting at the same time. People make jokes about the terminator.

Are we going to see a world where there's like robots like walking on the street, like you know, policemen and things like that, Like how how much are the robots from the movie is going to show up in our life. So we already have robots in parts of the world doing things that humans do in other parts of the world. For example, UM autonomous vehicles delivering packages UM that largely have have come in handy during the

pandemic when people couldn't get their houses. Are also robots, like I said in factory and automation UM, which was handy during the pandemic because they enabled the factory to keep running without as many people having to come into work. So what what what I think what we're going to see more quickly adopted are the types of robots that are used indoors. So you mentioned them in the park,

you mentioned them in the household. The ones that are indoors, whether it's a drone or a robot or something using sensing technology. When it's contained within four walls, it tends to have youwer regulatory concerns UM. For example, a vacuum cleaner UM or or if you can have one to emptier dishwasher or to to act like a personal assistant. We're seeing more of that because it's more contained, it's

in one little network UM, whereas something like UMV'ST. Adoption of autonomic autonomous vehicles might take a little bit longer because we've got traffic, We've got UM there's just the risks around potential car accidents and consumers and their decision making. UM it's coming, and I do believe we're going to have a world where we're seeing more and more of it, like the like the Jetsons. But however, I think the ones that we're going to see a faster, more rapid

adoption would are anything that's kind of already enclosed. Okay, Nina, I'm gonna ask you a question that I ask everybody at the end of trillions. What's your favorite et F tick care that isn't one that you're affiliated with. UM. I mean, I'll throw a point over to Kathy Wood and I'll say r G is a pretty cool strategy. UM it is vastly diversified from ours. So that's why

I don't feel threatened by it in any way. But if you want a little bit more tight exposure to that genomic world exclusively and uh and and they do. They don't have the modified equal waiting, but it's it is definitely outperforming a lot of the E T f that are out there and and you know, mixed are on fire right now, so that's another interesting one to compliment into one's portfolio. Nina Deca, thank you so much for joining us on Trilliance, Thanks for having me, Thanks

for listening to Trillions until next time. You can find us on the Bloomberg Terminal, Bloomberg dot com, Apple Podcasts, Spotify, and wherever else you like to listen. We'd love to hear from you. We're on Twitter, I'm at Joel Weber Show, He's at Eric Faltunas, and you can find robo Global at robot Global. This episode of Trillions was produced by Magnus Hendrickson. Francesco Levi is the head of Bloomberg Podcasting by