Launched on 01/31/2006, the SPDR S&P Biotech ETF (
XBI Quick Quote XBI - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Healthcare - Biotech segment of the equity market.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.
Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare - Biotech is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 6, placing it in top 38%.
The fund is sponsored by State Street Global Advisors. It has amassed assets over $7.40 billion, making it one of the largest ETFs attempting to match the performance of the Healthcare - Biotech segment of the equity market. XBI seeks to match the performance of the S&P Biotechnology Select Industry Index before fees and expenses.
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.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
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.
Looking at individual holdings, Twist Bioscience Corp. (
TWST Quick Quote TWST - Free Report) accounts for about 1.49% of total assets, followed by Iovance Biotherapeutics Inc ( IOVA Quick Quote IOVA - Free Report) and Fate Therapeutics Inc. ( FATE Quick Quote FATE - Free Report) .
The top 10 holdings account for about 13.29% of total assets under management.
Performance and Risk
The ETF has lost about -27.47% and is down about -38.67% so far this year and in the past one year (as of 09/05/2022), respectively. XBI has traded between $62.81 and $134.15 during this last 52-week period.
The ETF has a beta of 1.06 and standard deviation of 38.64% 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 holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XBI is an excellent option for investors seeking exposure to the Health Care ETFs segment of the market. There are other additional ETFs in the space that 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 $1.33 billion in assets, iShares Biotechnology ETF has $7.77 billion. FBT has an expense ratio of 0.55% and IBB charges 0.44%. Bottom Line
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Zacks ETF Center.