For investors looking for less volatility compared to stocks, here’s an overview of the five largest biotechnology ETFs for consideration.
Investing in the biotech industry can be a long road to gains given the sector’s volatility.
Even with a good understanding of the system, no one can predict which treatment, device or therapy will give the biggest return, making biotech exchange-traded funds (ETFs) a more secure option than individual biotech stocks.
An ETF is a relatively safe investment route that can minimize losses while offering exposure to multiple companies instead of focusing on the gains and losses of a single biotech stock.
With that in mind, here’s a brief look at the five top biotechnology ETFs by total assets. Data was sourced from ETFdb.com on May 27, 2022, and all data was current as of that time.
1. iShares NASDAQ Biotechnology ETF (NASDAQ:IBB)
Total assets: US$7.37 billion
The iShares NASDAQ Biotechnology ETF was launched on February 5, 2001, and tracks 377 holdings. This iShares ETF is a diversified fund in that it provides exposure to biotechnology, pharmaceutical and life science tools and services. Its overarching investment goal is to track NASDAQ-listed companies focused on these areas.
Its top three holdings are: Amgen (NASDAQ:AMGN), weighted at 9.84 percent; Gilead Sciences (NASDAQ:GILD) with a 8.58 percent weight; and Regeneron Pharmaceuticals (NASDAQ:REGN) at a weight of 7.55 percent.
2. SPDR S&P Biotech ETF (ARCA:XBI)
Total assets: US$5.54 billion
Established on February 6, 2006, the SPDR S&P Biotech ETF is a largely equally weighted fund that focuses mostly on biotech companies with some pharmaceutical companies. As noted by ETF.com, it focuses on small- and micro-cap companies, which makes the weight of each holding smaller than the holdings of other ETFs in this sector.
The SPDR S&P Biotech ETF has 158 companies in its portfolio, with the top three being: Halozyne Therapeutics (NASDAQ:HALO), which has a 1.52 percent weighting; United Therapeutics (NASDAQ:UTHR), weighted at 1.51 percent; and Biohaven Pharmaceutical Holding Company (NYSE:BHVN), with a 1.38 percent weight.
3. ARK Genomic Revolution Multi-Sector ETF (ARCA:ARKG)
Total assets: US$2.44 billion
The ARK Genomic Revolution Multi-Sector ETF came into existence on October 31, 2014, and tracks 48 holdings. This ETF has a specific industry area of focus and follows companies that develop products such as: CRISPR technology, bioinformatics, molecular diagnostics and stem cells.
This top biotechnology ETF's three most significant company holdings are: Exact Sciences (NASDAQ:EXAS), weighted at 8.9 percent; Ionis Pharmaceuticals (NASDAQ:IONS) at a weight of 7.48 percent; and Teledoc Health (NYSE:TDOC) at 5.35 percent.
4. First Trust Amex Biotechnology Index (ARCA:FBT)
Total assets: US$1.26 billion
The First Trust Amex Biotechnology Index entered the market on June 23, 2006, and aims to track the NYSE Arca Biotechnology Index as closely as it can. Companies in this fund are generally involved in areas such as recombinant DNA technology, molecular biology, genetic engineering and genomics.
The fund has only 31 holdings; this means they are largely equally weighted. The top three holdings of the fund are the following large-cap companies: Grifols (NASDAQ:GRFS) at a 4.69 percent weighting; United Therapeutics, representing a 4.47 percent weight; and Gilead Sciences, coming in at a 3.98 percent weight.
5. Direxion Daily S&P Biotech Bull 3x Shares ETF (ARCA:LABU)
Total assets: US$608.86 million
Founded on May 28, 2015, the Direxion Daily S&P Biotech Bull 3x Shares ETF does not mirror an index. Instead, its goal is to obtain daily investment results of at least 300 percent of the S&P Biotechnology Select Industry Index.
Like some of the other ETFs on this list, companies in the Direxion Daily S&P Biotech Bull 3x Shares ETF have an equally weighted average. Its top holdings include: Halozyme Therapeutics, which has a 0.88 percent weight; United Therapeutics with a weight of 0.85 percent; and Alkermes (NASDAQ:ALKS) at a weight of 0.79 percent.
This is an updated version of an article first published by the Investing News Network in 2016.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
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