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.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
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 7, placing it in top 44%.
The fund is sponsored by State Street Global Advisors. It has amassed assets over $6.60 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.
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
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
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. 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, Scilex Holding Company accounts for about 1.37% of total assets, followed by Tg Therapeutics Inc. (
TGTX Quick Quote TGTX - Free Report) and Viking Therapeutics Inc. ( VKTX Quick Quote VKTX - Free Report) .
The top 10 holdings account for about 12.30% of total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Biotech ETF has gained about 3.33% so far, and is up roughly 4.12% over the last 12 months (as of 07/18/2023). XBI has traded between $73.13 and $94.90 in this past 52-week period.
The ETF has a beta of 0.94 and standard deviation of 36.55% for the trailing three-year period, making it a high risk choice in the space. With about 151 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 $1.42 billion in assets, iShares Biotechnology ETF has $7.55 billion. FBT has an expense ratio of 0.56% and IBB charges 0.44%. Bottom Line
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Zacks ETF Center.