Looking for broad exposure to the Healthcare - Biotech segment of the equity market? You should consider the iShares Biotechnology ETF (
IBB Quick Quote IBB - Free Report) , a passively managed exchange traded fund launched on 02/05/2001.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. 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 Blackrock. It has amassed assets over $7.81 billion, making it one of the largest ETFs attempting to match the performance of the Healthcare - Biotech segment of the equity market. IBB seeks to match the performance of the Nasdaq Biotechnology Index before fees and expenses.
The ICE Biotechnology Index contains securities of NASDAQ listed companies that are classified as either biotechnology or pharmaceuticals.
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.44%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.26%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, 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, Vertex Pharmaceuticals Inc (
VRTX Quick Quote VRTX - Free Report) accounts for about 7.60% of total assets, followed by Gilead Sciences Inc ( GILD Quick Quote GILD - Free Report) and Amgen Inc ( AMGN Quick Quote AMGN - Free Report) .
The top 10 holdings account for about 50.28% of total assets under management.
Performance and Risk
So far this year, IBB has lost about -19.25%, and is down about -29.77% in the last one year (as of 09/08/2022). During this past 52-week period, the fund has traded between $105.82 and $173.92.
The ETF has a beta of 0.85 and standard deviation of 27.68% for the trailing three-year period, making it a high risk choice in the space. With about 377 holdings, it effectively diversifies company-specific risk.
IShares Biotechnology 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, IBB 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 SPDR S&P Biotech ETF ( XBI Quick Quote XBI - Free Report) tracks S&P Biotechnology Select Industry Index. First Trust NYSE Arca Biotechnology ETF has $1.32 billion in assets, SPDR S&P Biotech ETF has $7.44 billion. FBT has an expense ratio of 0.55% and XBI charges 0.35%. Bottom Line
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Zacks ETF Center.