The SPDR S&P Biotech ETF (
XBI Quick Quote XBI - Free Report) was launched on 01/31/2006, and is a smart beta exchange traded fund designed to offer broad exposure to the Health Care ETFs category of the market. What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is sponsored by State Street Global Advisors. It has amassed assets over $7.84 billion, making it one of the largest ETFs in the Health Care ETFs. Before fees and expenses, this particular fund seeks to match the performance of the S&P Biotechnology Select Industry Index.
The S&P Biotechnology Select Industry Index represents the biotechnology sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Biotech Index is a modified equal weight index.
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.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
The fund has a 12-month trailing dividend yield of 0%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Healthcare sector - about 100% of the portfolio.
When you look at individual holdings, Twist Bioscience Corp. (
TWST Quick Quote TWST - Free Report) accounts for about 1.49% of the fund's total assets, followed by Iovance Biotherapeutics Inc ( IOVA Quick Quote IOVA - Free Report) and Fate Therapeutics Inc. ( FATE Quick Quote FATE - Free Report) .
XBI's top 10 holdings account for about 13.29% of its total assets under management.
Performance and Risk
The ETF has lost about -27.06% so far this year and is down about -35.36% in the last one year (as of 07/22/2022). In the past 52-week period, it has traded between $62.81 and $136.53.
The ETF has a beta of 1.08 and standard deviation of 38.10% for the trailing three-year period, making it a high risk choice in the space. With about 137 holdings, it effectively diversifies company-specific risk.
SPDR S&P Biotech 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.
First Trust NYSE Arca Biotechnology ETF (
FBT Quick Quote FBT - Free Report) tracks NYSE Arca Biotechnology Index and the iShares Biotechnology ETF ( IBB Quick Quote IBB - Free Report) tracks Nasdaq Biotechnology Index. First Trust NYSE Arca Biotechnology ETF has $1.37 billion in assets, iShares Biotechnology ETF has $8.17 billion. FBT has an expense ratio of 0.55% and IBB charges 0.45%.
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.
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.