If you're interested in broad exposure to the Healthcare - Biotech segment of the equity market, look no further than the First Trust NYSE Arca Biotechnology ETF (FBT), a passively managed exchange traded fund launched on 06/19/2006.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
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 9, placing it in bottom 44%.
Index Details
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.41 billion, making it one of the larger ETFs attempting to match the performance of the Healthcare - Biotech segment of the equity market. FBT seeks to match the performance of the NYSE Arca Biotechnology Index before fees and expenses.
The NYSE Arca Biotechnology Index is an equal dollar weighted index designed to measure the performance of a cross section of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services.
Costs
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.56%, making it on par with most peer 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, Seagen Inc. (SGEN) accounts for about 5.39% of total assets, followed by Regeneron Pharmaceuticals, Inc. (REGN) and Exelixis, Inc. (EXEL).
The top 10 holdings account for about 38.29% of total assets under management.
Performance and Risk
So far this year, FBT has gained about 0.63%, and is up roughly 12.40% in the last one year (as of 07/26/2023). During this past 52-week period, the fund has traded between $128.60 and $165.37.
The ETF has a beta of 0.77 and standard deviation of 23.14% for the trailing three-year period, making it a high risk choice in the space. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust NYSE Arca Biotechnology ETF sports a Zacks ETF Rank of 4 (Sell), which is based on expected asset class return, expense ratio, and momentum, among other factors. FBT, then, is not a great choice for investors seeking exposure to the Health Care ETFs segment of the market. However, there are better ETFs in the space to consider.
SPDR S&P Biotech ETF (XBI) tracks S&P Biotechnology Select Industry Index and the iShares Biotechnology ETF (IBB) tracks Nasdaq Biotechnology Index. SPDR S&P Biotech ETF has $6.35 billion in assets, iShares Biotechnology ETF has $7.67 billion. XBI has an expense ratio of 0.35% and IBB charges 0.44%.
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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Get it free >>First Trust NYSE Arca Biotechnology ETF (FBT): ETF Research Reports
Regeneron Pharmaceuticals, Inc. (REGN) : Free Stock Analysis Report
Exelixis, Inc. (EXEL) : Free Stock Analysis Report
iShares Biotechnology ETF (IBB): ETF Research Reports
Seagen Inc. (SGEN) : Free Stock Analysis Report
SPDR S&P Biotech ETF (XBI): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
