Should You Invest in the iShares U.S. Pharmaceuticals ETF (IHE)?

Launched on 05/01/2006, the iShares U.S. Pharmaceuticals ETF (IHE) is a passively managed exchange traded fund designed to provide a broad exposure to the Healthcare - Pharma segment of the equity market.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Healthcare - Pharma is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 3, placing it in top 19%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $575.23 million, making it one of the larger ETFs attempting to match the performance of the Healthcare - Pharma segment of the equity market. IHE seeks to match the performance of the Dow Jones U.S. Select Pharmaceuticals Index before fees and expenses.

The Dow Jones U.S. Select Pharmaceuticals Index is free-float adjusted market capitalization-weighted index. It includes pharmaceutical companies such as manufacturers of prescription or over-the-counter drugs or vaccines, but excludes producers of vitamins.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.39%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 1.73%.

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.

This ETF has heaviest allocation in the Healthcare sector--about 100% of the portfolio.

Looking at individual holdings, Johnson & Johnson (JNJ) accounts for about 22.46% of total assets, followed by Eli Lilly (LLY) and Bristol Myers Squibb (BMY).

The top 10 holdings account for about 79.30% of total assets under management.

Performance and Risk

Year-to-date, the iShares U.S. Pharmaceuticals ETF has gained about 2% so far, and was up about 8.23% over the last 12 months (as of 04/28/2025). IHE has traded between $61 and $72.86 in this past 52-week period.

The ETF has a beta of 0.62 and standard deviation of 15.76% for the trailing three-year period, making it a high risk choice in the space. With about 42 holdings, it has more concentrated exposure than peers.

Alternatives

IShares U.S. Pharmaceuticals 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, IHE 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.

Invesco Pharmaceuticals ETF (PJP) tracks Dynamic Pharmaceutical Intellidex Index and the VanEck Pharmaceutical ETF (PPH) tracks MVIS US Listed Pharmaceutical 25 Index. Invesco Pharmaceuticals ETF has $238.33 million in assets, VanEck Pharmaceutical ETF has $649.23 million. PJP has an expense ratio of 0.56% and PPH charges 0.36%.

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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This article originally published on Zacks Investment Research (zacks.com).

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