Launched on 01/31/2006, the SPDR S&P Biotech ETF (XBI) is a smart beta exchange traded fund offering broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
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
XBI is managed by State Street Investment Management, and this fund has amassed over $5.42 billion, which makes it one of the largest ETFs in the Health Care ETFs. This particular fund seeks to match the performance of the S&P Biotechnology Select Industry Index before fees and expenses.
The S&P Biotechnology Select Industry Index represents the biotechnology sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Biotech Index is a modified equal weight index.
Cost & Other Expenses
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 cousins, other things remaining the same.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
It's 12-month trailing dividend yield comes in at 0.03%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For XBI, it has heaviest allocation in the Healthcare sector --about 100% of the portfolio.
Looking at individual holdings, Alnylam Pharmaceuticals Inc (ALNY) accounts for about 3.46% of total assets, followed by Insmed Inc (INSM) and Halozyme Therapeutics Inc (HALO).
XBI's top 10 holdings account for about 27.41% of its total assets under management.
Performance and Risk
The ETF return is roughly 3.76% so far this year and is down about -7.66% in the last one year (as of 09/16/2025). In the past 52-week period, it has traded between $69.80 and $104.18
The fund has a beta of 0.89 and standard deviation of 28.28% for the trailing three-year period, which makes XBI a high risk choice in this particular space. With about 129 holdings, it effectively diversifies company-specific risk .
Alternatives
SPDR S&P Biotech 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.
First Trust NYSE Arca Biotechnology ETF (FBT) tracks NYSE Arca Biotechnology Index and the iShares Biotechnology ETF (IBB) tracks Nasdaq Biotechnology Index. First Trust NYSE Arca Biotechnology ETF has $1.07 billion in assets, iShares Biotechnology ETF has $5.66 billion. FBT has an expense ratio of 0.54% and IBB changes 0.44%.
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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SPDR S&P Biotech ETF (XBI): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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