Designed to provide broad exposure to the Health Care ETFs category of the market, the State Street SPDR S&P Pharmaceuticals ETF (XPH) is a smart beta exchange traded fund launched on 06/19/2006.
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
XPH is managed by State Street Investment Management, and this fund has amassed over $261.7 million, which makes it one of the average sized ETFs in the Health Care ETFs. Before fees and expenses, XPH seeks to match the performance of the S&P Pharmaceuticals Select Industry Index.
The S&P Pharmaceuticals Select Industry Index represents the pharmaceuticals 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 Pharmaceuticals Index is a modified equal weight index.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Operating expenses on an annual basis are 0.35% for XPH, making it one of the least expensive products in the space.
XPH's 12-month trailing dividend yield is 0.84%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
This ETF has heaviest allocation in the Healthcare sector - about 100% of the portfolio.
When you look at individual holdings, Mind Medicine Mindmed Inc (MNMD) accounts for about 2.2% of the fund's total assets, followed by Xeris Biopharma Holdings Inc (XERS) and Merck + Co. Inc. (MRK).
The top 10 holdings account for about 20.85% of total assets under management.
Performance and Risk
The ETF has lost about -1.11% and is up about 23.27% so far this year and in the past one year (as of 01/29/2026), respectively. XPH has traded between $36.65 and $57.56 during this last 52-week period.
The fund has a beta of 0.56 and standard deviation of 19.18% for the trailing three-year period, which makes XPH a high risk choice in this particular space. With about 61 holdings, it effectively diversifies company-specific risk .
Alternatives
State Street SPDR S&P Pharmaceuticals 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.
iShares U.S. Pharmaceuticals ETF (IHE) tracks Dow Jones U.S. Select Pharmaceuticals Index and the VanEck Pharmaceutical ETF (PPH) tracks MVIS US Listed Pharmaceutical 25 Index. iShares U.S. Pharmaceuticals ETF has $969.19 million in assets, VanEck Pharmaceutical ETF has $1.16 billion. IHE has an expense ratio of 0.38% and PPH changes 0.36%.
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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State Street SPDR S&P Pharmaceuticals ETF (XPH): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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