Launched on 02/05/2001, the iShares Biotechnology ETF (IBB) is a passively managed exchange traded fund designed to provide a broad exposure to the Healthcare - Biotech segment of the equity market.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.
Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare - Biotech is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 7, placing it in top 44%.
Index Details
The fund is sponsored by Blackrock. It has amassed assets over $7.69 billion, making it one of the largest ETFs attempting to match the performance of the Healthcare - Biotech segment of the equity market. 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.
Costs
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.45%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.26%.
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.
This ETF has heaviest allocation in the Healthcare sector--about 100% of the portfolio.
Looking at individual holdings, Amgen Inc (AMGN) accounts for about 11.27% of total assets, followed by Gilead Sciences Inc (GILD) and Regeneron Pharmaceuticals Inc (REGN).
The top 10 holdings account for about 51.38% of total assets under management.
Performance and Risk
The ETF has lost about -21.04% so far this year and is down about -27.03% in the last one year (as of 07/04/2022). In that past 52-week period, it has traded between $105.82 and $176.21.
The ETF has a beta of 0.86 and standard deviation of 27.33% for the trailing three-year period, making it a high risk choice in the space. With about 379 holdings, it effectively diversifies company-specific risk.