A smart beta exchange traded fund, the iShares Biotechnology ETF (IBB Quick QuoteIBB - 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?

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.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking 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.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

IBB is managed by Blackrock, and this fund has amassed over $5.63 billion, which makes it one of the largest ETFs in the Health Care ETFs. Before fees and expenses, IBB seeks to match the performance of the Nasdaq Biotechnology Index.

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.

Operating expenses on an annual basis are 0.45% for IBB, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 0.28%.

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.

Representing 100% of the portfolio, the fund has heaviest allocation to the Healthcare sector.

Looking at individual holdings, Vertex Pharmaceuticals Inc (VRTX) accounts for about 7.96% of total assets, followed by Amgen Inc (AMGN) and Gilead Sciences Inc (GILD).

The top 10 holdings account for about 47.73% of total assets under management.

Performance and Risk

So far this year, IBB return is roughly 5.05%, and is down about -4.01% in the last one year (as of 08/18/2025). During this past 52-week period, the fund has traded between $112.02 and $149.47.

IBB has a beta of 0.75 and standard deviation of 20.16% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 261 holdings, it effectively diversifies company-specific risk .

Alternatives

iShares Biotechnology 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) tracks NYSE Arca Biotechnology Index and the SPDR S&P Biotech ETF (XBI) tracks S&P Biotechnology Select Industry Index. First Trust NYSE Arca Biotechnology ETF has $1.08 billion in assets, SPDR S&P Biotech ETF has $5.09 billion. FBT has an expense ratio of 0.54% and XBI changes 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.