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ZUH: Access to the Booming U.S. Healthcare Sector

Mirza Ali Shakir

ZUH: Access to the Booming U.S. Healthcare Sector

COVID-19 severely impacted the U.S. healthcare sector, but the proliferation of vaccines has allowed the sector to strongly recover. The pandemic also sped up the adoption of mRNA vaccines and accelerated the use of telemedicine and related technologies. With telemedicine, the breadth of healthcare services has expanded outside of the industry’s physical capacities.

We believe that in addition to the benefits of innovation, secular trends and favourable policies support an optimistic long-term outlook for the U.S. healthcare sector.


Demographics: Servicing an Aging Population
The U.S. is aging, with 16% of the population currently older than 65 – a fast-growing segment that is expected to rise to 23% by 2060 .1 Life expectancy is also increasing. These trends provide strong tailwinds to the healthcare sector, which should lead to organic growth as a result. Increased demand is also expected to serve as a catalyst for more hospitals, products and pharmaceuticals.

The BMO Equal Weight US Health Care Hedged to CAD Index ETF (ticker: ZUH) has invested 75% of overall assets in the healthcare products, healthcare services, and pharmaceuticals sub-industries, and is therefore well positioned to benefit from secular trends. The equal-weight nature of these ETFs also ensures consistent 70-80% exposure to favourable demographic changes.


Build Back Better: Expanding Coverage for Health Insurance
U.S. President Joe Biden has allocated healthcare coverage as a key component of his ‘Build Back Better’ agenda.2 The plan proposes enhanced tax credits to lower premiums that will help millions of Americans to enrol for coverage through the Affordable Care Act (ACA).

An estimated four million people are eligible for the new tax credits. As of August 15, 2021, 2.5 million people have already signed up for extended coverage.3 These higher enrolments will enable the government to indirectly subsidize spending on healthcare, boosting the entire sector. In other words, fiscal stimulus.


Innovation: More for Less
mRNA technology was not developed overnight. It took 20+ years for the technology behind COVID-19 vaccines to come to fruition. Yet, mRNA is only one of many biological innovations that is becoming increasingly affordable. The cost for certain techniques like genome sequencing has dropped from millions to hundreds of dollars in recent years.4 The development of new and affordable treatments would be a boon for the space, and help people live longer, further supportive of the demographic tailwind.

As a result, the advent and adoption of new technologies will allow companies in the biotechnology space to prosper. The BMO Equal Weight US Health Care Hedged to CAD Index ETF (ticker: ZUH) has a 22% allocation to the biotechnology sub-industry,5 which is ready to achieve scale and deliver a positive ripple effect on U.S. healthcare.


Investing in U.S. Healthcare Through ZUH
The equal-weighted structure of ZUH offers better diversification than the market-weighted equivalent. While the market-weighted fund allocates assets based on price movements, ZUH sticks to set thresholds. This way, the equal-weighted ETF avoids company-specific risks and is therefore better diversified. In fact, ZUH has outperformed the market-weighted Healthcare Select Sector Index (IXVTR) over the past three years.


Returns of ZUH vs. the Market-Weighted Healthcare Sector Index


Source: Bloomberg; data as of October 13, 2021. Index returns do not reflect transactions costs or the deduction of other fees and expenses and it is not possible to invest directly in an Index. Past performance is not indicative of future results.


A deeper dive into the constituents of ZUH and the S&P 500-based Healthcare Select Sector Index also highlights the concentration risk of the market-weighted strategy.


ZUH - BMO Equal Weight U.S. Healthcare ETF

Name Sub-Industry Weight
Molina Healthcare Inc Healthcare Services 1.52%
Merck & Co. Inc Pharmaceuticals 1.48%
Alnylam Pharmaceuticals Inc Pharmaceuticals 1.48%
Seagen Inc Healthcare Services 1.48%
Anthem Inc Healthcare Services 1.44%
Top 5 Holdings 7.40%

Healthcare Select Sector Index (S&P Healthcare)

Name Sub-Industry Weight
Johnson & Johnson Pharmaceuticals 8.69%
UnitedHealth Group Inc Healthcare Services 7.96%
Pfizer Inc Pharmaceuticals 4.91%
Thermo Fisher Scientific Healthcare Products 4.74%
Abbott Laboratories Healthcare Products 4.35%
Top 5 Holdings 30.65%

Source: Bloomberg; data as of October 13, 2021. The portfolio holdings are subject to change without notice and only represent a small percentage of portfolio holdings. They are not recommendations to buy or sell any particular security.


As shown, the market-weighted ETF is concentrated in its top five holdings. The top holding, Johnson and Johnson, weighs more than the top five holdings in ZUH, overall. For investors looking for whole sector exposure, the equal-weighted approach is more representative of the entire landscape.

Shooting on All Fronts
The confluence of an aging population, enhanced access through virtual platforms, extended tax credits, and advancements in biotechnology present a unique, long-term investment opportunity. Investors can use ZUH to easily access diversified exposure to the U.S. healthcare sector.




1 Lauren Medina, Shannon Sabo, and Jonathan Vespa, “Living Longer: Historical and Projected Life Expectancy in the United States, 1960 to 2060,” United States Census Bureau, February 2020.

2 “FACT SHEET: Biden-⁠Harris Administration Lowers Health Care Costs,” The White House, August 10, 2021.

3 Ibid.

4 “DNA Sequencing Costs: Data,” National Human Genome Research Institute (NIH), 2020.

5 BMO Global Asset Management, as of October 13, 2021.

Mirza Ali Shakir

ZUH: Access to the Booming U.S. Healthcare Sector

COVID-19 severely impacted the U.S. healthcare sector, but the proliferation of vaccines has allowed the sector to strongly recover. The pandemic also sped up the adoption of mRNA vaccines and accelerated the use of telemedicine and related technologies. With telemedicine, the breadth of healthcare services has expanded outside of the industry’s physical capacities.

We believe that in addition to the benefits of innovation, secular trends and favourable policies support an optimistic long-term outlook for the U.S. healthcare sector.


Demographics: Servicing an Aging Population
The U.S. is aging, with 16% of the population currently older than 65 – a fast-growing segment that is expected to rise to 23% by 2060 .1 Life expectancy is also increasing. These trends provide strong tailwinds to the healthcare sector, which should lead to organic growth as a result. Increased demand is also expected to serve as a catalyst for more hospitals, products and pharmaceuticals.

The BMO Equal Weight US Health Care Hedged to CAD Index ETF (ticker: ZUH) has invested 75% of overall assets in the healthcare products, healthcare services, and pharmaceuticals sub-industries, and is therefore well positioned to benefit from secular trends. The equal-weight nature of these ETFs also ensures consistent 70-80% exposure to favourable demographic changes.


Build Back Better: Expanding Coverage for Health Insurance
U.S. President Joe Biden has allocated healthcare coverage as a key component of his ‘Build Back Better’ agenda.2 The plan proposes enhanced tax credits to lower premiums that will help millions of Americans to enrol for coverage through the Affordable Care Act (ACA).

An estimated four million people are eligible for the new tax credits. As of August 15, 2021, 2.5 million people have already signed up for extended coverage.3 These higher enrolments will enable the government to indirectly subsidize spending on healthcare, boosting the entire sector. In other words, fiscal stimulus.


Innovation: More for Less
mRNA technology was not developed overnight. It took 20+ years for the technology behind COVID-19 vaccines to come to fruition. Yet, mRNA is only one of many biological innovations that is becoming increasingly affordable. The cost for certain techniques like genome sequencing has dropped from millions to hundreds of dollars in recent years.4 The development of new and affordable treatments would be a boon for the space, and help people live longer, further supportive of the demographic tailwind.

As a result, the advent and adoption of new technologies will allow companies in the biotechnology space to prosper. The BMO Equal Weight US Health Care Hedged to CAD Index ETF (ticker: ZUH) has a 22% allocation to the biotechnology sub-industry,5 which is ready to achieve scale and deliver a positive ripple effect on U.S. healthcare.


Investing in U.S. Healthcare Through ZUH
The equal-weighted structure of ZUH offers better diversification than the market-weighted equivalent. While the market-weighted fund allocates assets based on price movements, ZUH sticks to set thresholds. This way, the equal-weighted ETF avoids company-specific risks and is therefore better diversified. In fact, ZUH has outperformed the market-weighted Healthcare Select Sector Index (IXVTR) over the past three years.


Returns of ZUH vs. the Market-Weighted Healthcare Sector Index


Source: Bloomberg; data as of October 13, 2021. Index returns do not reflect transactions costs or the deduction of other fees and expenses and it is not possible to invest directly in an Index. Past performance is not indicative of future results.


A deeper dive into the constituents of ZUH and the S&P 500-based Healthcare Select Sector Index also highlights the concentration risk of the market-weighted strategy.


ZUH - BMO Equal Weight U.S. Healthcare ETF

Name Sub-Industry Weight
Molina Healthcare Inc Healthcare Services 1.52%
Merck & Co. Inc Pharmaceuticals 1.48%
Alnylam Pharmaceuticals Inc Pharmaceuticals 1.48%
Seagen Inc Healthcare Services 1.48%
Anthem Inc Healthcare Services 1.44%
Top 5 Holdings 7.40%

Healthcare Select Sector Index (S&P Healthcare)

Name Sub-Industry Weight
Johnson & Johnson Pharmaceuticals 8.69%
UnitedHealth Group Inc Healthcare Services 7.96%
Pfizer Inc Pharmaceuticals 4.91%
Thermo Fisher Scientific Healthcare Products 4.74%
Abbott Laboratories Healthcare Products 4.35%
Top 5 Holdings 30.65%

Source: Bloomberg; data as of October 13, 2021. The portfolio holdings are subject to change without notice and only represent a small percentage of portfolio holdings. They are not recommendations to buy or sell any particular security.


As shown, the market-weighted ETF is concentrated in its top five holdings. The top holding, Johnson and Johnson, weighs more than the top five holdings in ZUH, overall. For investors looking for whole sector exposure, the equal-weighted approach is more representative of the entire landscape.

Shooting on All Fronts
The confluence of an aging population, enhanced access through virtual platforms, extended tax credits, and advancements in biotechnology present a unique, long-term investment opportunity. Investors can use ZUH to easily access diversified exposure to the U.S. healthcare sector.




1 Lauren Medina, Shannon Sabo, and Jonathan Vespa, “Living Longer: Historical and Projected Life Expectancy in the United States, 1960 to 2060,” United States Census Bureau, February 2020.

2 “FACT SHEET: Biden-⁠Harris Administration Lowers Health Care Costs,” The White House, August 10, 2021.

3 Ibid.

4 “DNA Sequencing Costs: Data,” National Human Genome Research Institute (NIH), 2020.

5 BMO Global Asset Management, as of October 13, 2021.

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