The iShares Biotechnology ETF (IBB) was launched on 02/05/2001, 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?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
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.
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
Because the fund has amassed over $7.06 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.45%.
It has a 12-month trailing dividend yield of 0.26%.
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.
IBB's heaviest allocation is in the Healthcare sector, which is about 99.80% of the portfolio.
Looking at individual holdings, Amgen Inc (AMGN) accounts for about 9.48% of total assets, followed by Vertex Pharmaceuticals Inc (VRTX) and Gilead Sciences Inc (GILD).
Its top 10 holdings account for approximately 53.66% of IBB's total assets under management.