The First Trust NYSE Arca Biotechnology ETF (FBT) was launched on 06/19/2006, 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 long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Because the fund has amassed over $1.19 billion, this makes it one of the larger ETFs in the Health Care ETFs. FBT is managed by First Trust Advisors. 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.
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 0.56%.
FBT's 12-month trailing dividend yield is 0.66%.
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.
FBT's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
Looking at individual holdings, Corcept Therapeutics Inc. (CORT) accounts for about 4.42% of total assets, followed by Intra-Cellular Therapies, Inc. (ITCI) and Beigene, Ltd. (adr) (ONC).
Its top 10 holdings account for approximately 38.31% of FBT's total assets under management.
Performance and Risk
The ETF has added roughly 7.08% and was up about 20.73% so far this year and in the past one year (as of 02/21/2025), respectively. FBT has traded between $141.52 and $182.19 during this last 52-week period.
The fund has a beta of 0.65 and standard deviation of 21.17% for the trailing three-year period, which makes FBT a high risk choice in this particular space. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust NYSE Arca 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.
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 $6.13 billion in assets, iShares Biotechnology ETF has $6.50 billion. XBI has an expense ratio of 0.35% and IBB charges 0.45%.
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.
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Get it free >>First Trust NYSE Arca Biotechnology ETF (FBT): ETF Research Reports
iShares Biotechnology ETF (IBB): ETF Research Reports
Corcept Therapeutics Incorporated (CORT) : Free Stock Analysis Report
Intra-Cellular Therapies Inc. (ITCI) : Free Stock Analysis Report
SPDR S&P Biotech ETF (XBI): ETF Research Reports
BeiGene, Ltd. (ONC) : Free Stock Analysis Report
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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.
