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Is SPDR S&P Biotech ETF (XBI) a Strong ETF Right Now?
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The SPDR S&P Biotech ETF (XBI - Free Report) was launched on 01/31/2006, and is a smart beta exchange traded fund designed to offer broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
XBI is managed by State Street Global Advisors, and this fund has amassed over $5.10 billion, which makes it one of the largest ETFs in the Health Care ETFs. This particular fund, before fees and expenses, seeks to match the performance of the S&P Biotechnology Select Industry Index.
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.
Cost & Other Expenses
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.
It has a 12-month trailing dividend yield of 0.17%.
Sector Exposure and Top Holdings
ETFs offer 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.
Taking into account individual holdings, Alnylam Pharmaceuticals Inc (ALNY - Free Report) accounts for about 2.75% of the fund's total assets, followed by Insmed Inc (INSM - Free Report) and Neurocrine Biosciences Inc (NBIX - Free Report) .
XBI's top 10 holdings account for about 25.13% of its total assets under management.
Performance and Risk
The ETF has lost about -8.22% so far this year and is down about -7.99% in the last one year (as of 05/06/2025). In the past 52-week period, it has traded between $69.80 and $104.18.
The ETF has a beta of 0.91 and standard deviation of 32.23% for the trailing three-year period, making it a high risk choice in the space. With about 130 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Biotech ETF is a reasonable option for investors seeking to outperform the Health Care ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
First Trust NYSE Arca Biotechnology ETF (FBT - Free Report) tracks NYSE Arca Biotechnology Index and the iShares Biotechnology ETF (IBB - Free Report) tracks Nasdaq Biotechnology Index. First Trust NYSE Arca Biotechnology ETF has $1.06 billion in assets, iShares Biotechnology ETF has $5.51 billion. FBT has an expense ratio of 0.56% and IBB charges 0.45%.
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 SPDR S&P Biotech ETF (XBI) a Strong ETF Right Now?
The SPDR S&P Biotech ETF (XBI - Free Report) was launched on 01/31/2006, and is a smart beta exchange traded fund designed to offer broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
XBI is managed by State Street Global Advisors, and this fund has amassed over $5.10 billion, which makes it one of the largest ETFs in the Health Care ETFs. This particular fund, before fees and expenses, seeks to match the performance of the S&P Biotechnology Select Industry Index.
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.
Cost & Other Expenses
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.
It has a 12-month trailing dividend yield of 0.17%.
Sector Exposure and Top Holdings
ETFs offer 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.
Taking into account individual holdings, Alnylam Pharmaceuticals Inc (ALNY - Free Report) accounts for about 2.75% of the fund's total assets, followed by Insmed Inc (INSM - Free Report) and Neurocrine Biosciences Inc (NBIX - Free Report) .
XBI's top 10 holdings account for about 25.13% of its total assets under management.
Performance and Risk
The ETF has lost about -8.22% so far this year and is down about -7.99% in the last one year (as of 05/06/2025). In the past 52-week period, it has traded between $69.80 and $104.18.
The ETF has a beta of 0.91 and standard deviation of 32.23% for the trailing three-year period, making it a high risk choice in the space. With about 130 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Biotech ETF is a reasonable option for investors seeking to outperform the Health Care ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
First Trust NYSE Arca Biotechnology ETF (FBT - Free Report) tracks NYSE Arca Biotechnology Index and the iShares Biotechnology ETF (IBB - Free Report) tracks Nasdaq Biotechnology Index. First Trust NYSE Arca Biotechnology ETF has $1.06 billion in assets, iShares Biotechnology ETF has $5.51 billion. FBT has an expense ratio of 0.56% and IBB charges 0.45%.
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.