Designed to provide broad exposure to the Healthcare - Biotech segment of the equity market, the First Trust NYSE Arca Biotechnology ETF (FBT) is a passively managed exchange traded fund launched on 06/19/2006.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
Investor-friendly, sector ETFs provide many options 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 3, placing it in top 19%.
Index Details
The fund is sponsored by First Trust Advisors. It has amassed assets over $1.18 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
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, Exelixis, Inc. (EXEL) accounts for about 4.31% of total assets, followed by Incyte Corporation (INCY) and Intra-Cellular Therapies, Inc. (ITCI).
The top 10 holdings account for about 36.77% of total assets under management.
Performance and Risk
The ETF has added about 11.46% and is up roughly 22.04% so far this year and in the past one year (as of 12/10/2024), respectively. FBT has traded between $141.52 and $178.69 during this last 52-week period.
The ETF has a beta of 0.64 and standard deviation of 21.81% 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 carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FBT is a reasonable option for those seeking exposure to the Health Care ETFs area of the market. Investors might also want to consider some other ETF options in the space.
IShares Biotechnology ETF (IBB) tracks Nasdaq Biotechnology Index and the SPDR S&P Biotech ETF (XBI) tracks S&P Biotechnology Select Industry Index. IShares Biotechnology ETF has $6.97 billion in assets, SPDR S&P Biotech ETF has $7.09 billion. IBB has an expense ratio of 0.45% and XBI charges 0.35%.
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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First Trust NYSE Arca Biotechnology ETF (FBT): ETF Research Reports
Incyte Corporation (INCY) : Free Stock Analysis Report
Exelixis, Inc. (EXEL) : Free Stock Analysis Report
iShares Biotechnology ETF (IBB): ETF Research Reports
Intra-Cellular Therapies Inc. (ITCI) : 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.
