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Is iShares Biotechnology ETF (IBB) a Strong ETF Right Now?
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A smart beta exchange traded fund, the iShares Biotechnology ETF (IBB - Free Report) debuted on 02/05/2001, and offers 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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is sponsored by Blackrock. It has amassed assets over $7.30 billion, making it one of the largest ETFs in the Health Care ETFs. 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 & 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.
Annual operating expenses for IBB are 0.45%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.31%.
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.
For IBB, it has heaviest allocation in the Healthcare sector --about 99.80% of the portfolio.
When you look at individual holdings, Vertex Pharmaceuticals Inc (VRTX - Free Report) accounts for about 8.92% of the fund's total assets, followed by Regeneron Pharmaceuticals Inc (REGN - Free Report) and Amgen Inc (AMGN - Free Report) .
The top 10 holdings account for about 49.53% of total assets under management.
Performance and Risk
Year-to-date, the iShares Biotechnology ETF has lost about -3.01% so far, and is up roughly 2.47% over the last 12 months (as of 04/05/2024). IBB has traded between $112.41 and $140.89 in this past 52-week period.
The fund has a beta of 0.73 and standard deviation of 22.25% for the trailing three-year period, which makes IBB a high risk choice in this particular space. With about 230 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Biotechnology 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 - Free Report) tracks NYSE Arca Biotechnology Index and the SPDR S&P Biotech ETF (XBI - Free Report) tracks S&P Biotechnology Select Industry Index. First Trust NYSE Arca Biotechnology ETF has $1.14 billion in assets, SPDR S&P Biotech ETF has $7.21 billion. FBT has an expense ratio of 0.56% and XBI charges 0.35%.
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.
Bottom Line
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.
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Is iShares Biotechnology ETF (IBB) a Strong ETF Right Now?
A smart beta exchange traded fund, the iShares Biotechnology ETF (IBB - Free Report) debuted on 02/05/2001, and offers 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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is sponsored by Blackrock. It has amassed assets over $7.30 billion, making it one of the largest ETFs in the Health Care ETFs. 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 & 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.
Annual operating expenses for IBB are 0.45%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.31%.
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.
For IBB, it has heaviest allocation in the Healthcare sector --about 99.80% of the portfolio.
When you look at individual holdings, Vertex Pharmaceuticals Inc (VRTX - Free Report) accounts for about 8.92% of the fund's total assets, followed by Regeneron Pharmaceuticals Inc (REGN - Free Report) and Amgen Inc (AMGN - Free Report) .
The top 10 holdings account for about 49.53% of total assets under management.
Performance and Risk
Year-to-date, the iShares Biotechnology ETF has lost about -3.01% so far, and is up roughly 2.47% over the last 12 months (as of 04/05/2024). IBB has traded between $112.41 and $140.89 in this past 52-week period.
The fund has a beta of 0.73 and standard deviation of 22.25% for the trailing three-year period, which makes IBB a high risk choice in this particular space. With about 230 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Biotechnology 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 - Free Report) tracks NYSE Arca Biotechnology Index and the SPDR S&P Biotech ETF (XBI - Free Report) tracks S&P Biotechnology Select Industry Index. First Trust NYSE Arca Biotechnology ETF has $1.14 billion in assets, SPDR S&P Biotech ETF has $7.21 billion. FBT has an expense ratio of 0.56% and XBI charges 0.35%.
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.
Bottom Line
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.