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Should You Invest in the iShares U.S. Healthcare Providers ETF (IHF)?

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Launched on 05/01/2006, the iShares U.S. Healthcare Providers ETF (IHF - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Healthcare - Healthcare - Providers 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.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare - Healthcare - Providers is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 6, placing it in top 38%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $1.08 billion, making it one of the larger ETFs attempting to match the performance of the Healthcare - Healthcare - Providers segment of the equity market. IHF seeks to match the performance of the Dow Jones U.S. Select HealthCare Providers Index before fees and expenses.

The Dow Jones U.S. Select HealthCare Providers Index is free-float adjusted market capitalization-weighted index. It measures the performance of the health care providers sub-sector of the U.S. equity market. It includes health maintenance organizations, hospitals, clinics, dentists, opticians, nursing homes rehabilitation & retirement centres.

Costs

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 0.39%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 0.83%.

Sector Exposure and Top Holdings

ETFs offer a 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.

This ETF has heaviest allocation in the Healthcare sector--about 100% of the portfolio.

Looking at individual holdings, Unitedhealth Group Inc (UNH - Free Report) accounts for about 23.42% of total assets, followed by Elevance Health Inc (ELV - Free Report) and Cvs Health Corp (CVS - Free Report) .

The top 10 holdings account for about 74.33% of total assets under management.

Performance and Risk

The ETF has lost about -7.36% and is down about -4.44% so far this year and in the past one year (as of 05/24/2023), respectively. IHF has traded between $239.35 and $286.75 during this last 52-week period.

The ETF has a beta of 0.81 and standard deviation of 19.19% for the trailing three-year period, making it a medium risk choice in the space. With about 69 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares U.S. Healthcare Providers ETF sports a Zacks ETF Rank of 4 (Sell), which is based on expected asset class return, expense ratio, and momentum, among other factors. IHF, then, is not a great choice for investors seeking exposure to the Health Care ETFs segment of the market. Instead, there are better ETFs in the space to consider.

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