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?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

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.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

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

Because the fund has amassed over $8.68 billion, this makes it one of the largest ETFs in the Health Care ETFs. IBB is managed by Blackrock. 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

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 0.44%, making it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 0.22%.

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.

IBB's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.

Looking at individual holdings, Amgen Inc (AMGN) accounts for about 7.72% of total assets, followed by Vertex Pharmaceuticals Inc (VRTX) and Gilead Sciences Inc (GILD).

The top 10 holdings account for about 48.69% of total assets under management.

Performance and Risk

The ETF has added roughly 31.33% and it's up approximately 29.63% so far this year and in the past one year (as of 12/26/2025), respectively. IBB has traded between $112.02 and $173.83 during this last 52-week period.

The ETF has a beta of 0.76 and standard deviation of 19.00% for the trailing three-year period, making it a high risk choice in the space. With about 252 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 State Street SPDR S&P Biotech ETF (XBI) tracks S&P Biotechnology Select Industry Index. First Trust NYSE Arca Biotechnology ETF has $1.39 billion in assets, State Street SPDR S&P Biotech ETF has $8.4 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.