Designed to provide broad exposure to the Health Care ETFs category of the market, the iShares Biotechnology ETF (IBB) is a smart beta exchange traded fund launched on 02/05/2001.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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 $8.64 billion, this makes it one of the largest ETFs in the Health Care ETFs. IBB is managed by Blackrock. This particular fund seeks to match the performance of the Nasdaq Biotechnology Index before fees and expenses.
The ICE Biotechnology Index contains securities of NASDAQ listed companies that are classified as either biotechnology or pharmaceuticals.
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.
Annual operating expenses for IBB are 0.44%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.22%.
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.
IBB's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
Looking at individual holdings, Gilead Sciences Inc (GILD) accounts for about 9.66% of total assets, followed by Amgen Inc (AMGN) and Vertex Pharmaceuticals Inc (VRTX).
The top 10 holdings account for about 50.16% of total assets under management.
Performance and Risk
So far this year, IBB has gained about 4.5%, and was up about 27.39% in the last one year (as of 02/25/2026). During this past 52-week period, the fund has traded between $112.02 and $177.64.
The fund has a beta of 0.77 and standard deviation of 19.06% for the trailing three-year period, which makes IBB a high risk choice in this particular space. With about 263 holdings, it effectively diversifies company-specific risk .
Alternatives
iShares 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.
First Trust NYSE Arca Biotechnology ETF (FBT) tracks NYSE Arca Biotechnology Index and the State Street SPDR S&P Biotech ETF (XBI) tracks S&P Biotechnology Select Industry Index. First Trust NYSE Arca Biotechnology ETF has $2.39 billion in assets, State Street SPDR S&P Biotech ETF has $8.16 billion. FBT has an expense ratio of 0.54% and XBI changes 0.35%.
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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iShares Biotechnology ETF (IBB): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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