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Is First Trust NYSE Arca Biotechnology ETF (FBT) a Strong ETF Right Now?
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A smart beta exchange traded fund, the First Trust NYSE Arca Biotechnology ETF (FBT - Free Report) debuted on 06/19/2006, and offers broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.51 billion, making it one of the larger ETFs in the Health Care ETFs. FBT seeks to match the performance of the NYSE Arca Biotechnology Index before fees and expenses.
The NYSE Arca Biotechnology Index is an equal dollar weighted index designed to measure the performance of a cross section of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.55%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
FBT's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
Looking at individual holdings, Alnylam Pharmaceuticals, Inc. (ALNY - Free Report) accounts for about 4.95% of total assets, followed by Sarepta Therapeutics, Inc. (SRPT - Free Report) and Agios Pharmaceuticals, Inc. (AGIO - Free Report) .
Its top 10 holdings account for approximately 38.12% of FBT's total assets under management.
Performance and Risk
Year-to-date, the First Trust NYSE Arca Biotechnology ETF has added roughly 2.24% so far, and was up about 1.86% over the last 12 months (as of 01/09/2023). FBT has traded between $123.32 and $159.04 in this past 52-week period.
The fund has a beta of 0.81 and standard deviation of 27.32% for the trailing three-year period, which makes FBT a high risk choice in this particular space. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust NYSE Arca Biotechnology ETF is an excellent option for investors seeking to outperform the Health Care ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
SPDR S&P Biotech ETF (XBI - Free Report) tracks S&P Biotechnology Select Industry Index and the iShares Biotechnology ETF (IBB - Free Report) tracks Nasdaq Biotechnology Index. SPDR S&P Biotech ETF has $8.20 billion in assets, iShares Biotechnology ETF has $8.86 billion. XBI has an expense ratio of 0.35% and IBB charges 0.44%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Health Care ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Is First Trust NYSE Arca Biotechnology ETF (FBT) a Strong ETF Right Now?
A smart beta exchange traded fund, the First Trust NYSE Arca Biotechnology ETF (FBT - Free Report) debuted on 06/19/2006, and offers broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.51 billion, making it one of the larger ETFs in the Health Care ETFs. FBT seeks to match the performance of the NYSE Arca Biotechnology Index before fees and expenses.
The NYSE Arca Biotechnology Index is an equal dollar weighted index designed to measure the performance of a cross section of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.55%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
FBT's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
Looking at individual holdings, Alnylam Pharmaceuticals, Inc. (ALNY - Free Report) accounts for about 4.95% of total assets, followed by Sarepta Therapeutics, Inc. (SRPT - Free Report) and Agios Pharmaceuticals, Inc. (AGIO - Free Report) .
Its top 10 holdings account for approximately 38.12% of FBT's total assets under management.
Performance and Risk
Year-to-date, the First Trust NYSE Arca Biotechnology ETF has added roughly 2.24% so far, and was up about 1.86% over the last 12 months (as of 01/09/2023). FBT has traded between $123.32 and $159.04 in this past 52-week period.
The fund has a beta of 0.81 and standard deviation of 27.32% for the trailing three-year period, which makes FBT a high risk choice in this particular space. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust NYSE Arca Biotechnology ETF is an excellent option for investors seeking to outperform the Health Care ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
SPDR S&P Biotech ETF (XBI - Free Report) tracks S&P Biotechnology Select Industry Index and the iShares Biotechnology ETF (IBB - Free Report) tracks Nasdaq Biotechnology Index. SPDR S&P Biotech ETF has $8.20 billion in assets, iShares Biotechnology ETF has $8.86 billion. XBI has an expense ratio of 0.35% and IBB charges 0.44%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Health Care ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.