Designed to provide broad exposure to the Health Care ETFs category of the market, the First Trust NYSE Arca Biotechnology ETF (FBT) is a smart beta exchange traded fund launched on 06/19/2006.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $1.02 billion, this makes it one of the larger ETFs in the Health Care ETFs. FBT is managed by First Trust Advisors. Before fees and expenses, FBT seeks to match the performance of the NYSE Arca Biotechnology Index.
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.
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.
Operating expenses on an annual basis are 0.56% for FBT, making it on par with most peer products in the space.
FBT's 12-month trailing dividend yield is 0.74%.
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.
FBT's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
Taking into account individual holdings, Beigene, Ltd. (adr) (ONC) accounts for about 5.25% of the fund's total assets, followed by Intra-Cellular Therapies, Inc. (ITCI) and Gilead Sciences, Inc. (GILD).
The top 10 holdings account for about 42.29% of total assets under management.
Performance and Risk
So far this year, FBT has lost about -5.16%, and was up about 9.55% in the last one year (as of 04/24/2025). During this past 52-week period, the fund has traded between $142.59 and $182.19.
The fund has a beta of 0.70 and standard deviation of 21.77% for the trailing three-year period, which makes FBT a high risk choice in this particular space. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
First Trust NYSE Arca 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.
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 $4.92 billion in assets, iShares Biotechnology ETF has $5.39 billion. XBI has an expense ratio of 0.35% and IBB charges 0.45%.
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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First Trust NYSE Arca Biotechnology ETF (FBT): ETF Research Reports Gilead Sciences, Inc. (GILD): Free Stock Analysis Report iShares Biotechnology ETF (IBB): ETF Research Reports SPDR S&P Biotech ETF (XBI): ETF Research Reports BeiGene, Ltd. (ONC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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