This analysis is by Bloomberg Intelligence senior analysts Eric Balchunas and Athanasios Psarofagis. It appeared first on the Bloomberg Terminal.

The hunt for a COVID-19 vaccine is fueling early gains for a new theme exchange-traded fund, GERM, which has higher allocations to companies such as Inovio, Novavax and Moderna than any other ETF. A similar-sounding ETF isn’t getting the same boost, highlighting the importance of due diligence in the increasingly popular thematic category.

GERM’s all-in design pays off immediately

The ETFMG Treatments Testing and Advancements ETF (GERM) was up 13% in its first two weeks, offering a reminder of how crucial index design is for theme ETFs. GERM is highly focused, going all-in on biotech names that aim to treat and prevent viruses, including some companies pursuing a COVID-19 vaccine. Inovio and Novavax are responsible for about half of the ETF’s gain. No ETF has a bigger weighting to either

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