Should You Invest in the VanEck Biotech ETF (BBH)?

Designed to provide broad exposure to the Healthcare - Biotech segment of the equity market, the VanEck Biotech ETF (BBH) is a passively managed exchange traded fund launched on 12/20/2011.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Additionally, sector ETFs offer convenient 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 9, placing it in bottom 44%.

Index Details

The fund is sponsored by Van Eck. It has amassed assets over $429.42 million, making it one of the larger ETFs attempting to match the performance of the Healthcare - Biotech segment of the equity market. BBH seeks to match the performance of the MVIS US Listed Biotech 25 Index before fees and expenses.

The MVIS US Listed Biotech 25 Index tracks the overall performance of companies involved in the development and production, marketing and sales of drugs based on genetic analysis and diagnostic equipment.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.28%.

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 14.52% of total assets, followed by Gilead Sciences Inc (GILD) and Vertex Pharmaceuticals Inc (VRTX).

The top 10 holdings account for about 66.61% of total assets under management.

Performance and Risk

The ETF has lost about -23.25% and is down about -17.37% so far this year and in the past one year (as of 05/16/2022), respectively. BBH has traded between $134.84 and $220.75 during this last 52-week period.

The ETF has a beta of 0.87 and standard deviation of 25.91% for the trailing three-year period, making it a high risk choice in the space. With about 26 holdings, it has more concentrated exposure than peers.

Alternatives

VanEck Biotech 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, BBH is a sufficient 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.

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 $5.51 billion in assets, iShares Biotechnology ETF has $7.34 billion. XBI has an expense ratio of 0.35% and IBB charges 0.45%.

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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.