The iShares Biotechnology ETF (IBB) made its debut on 02/05/2001, and is a smart beta exchange traded fund that provides broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
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
Managed by Blackrock, IBB has amassed assets over $5.27 billion, making it one of the largest ETFs in the Health Care ETFs. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq Biotechnology Index.
The ICE Biotechnology Index contains securities of NASDAQ listed companies that are classified as either biotechnology or pharmaceuticals.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.45%, making it on par with most peer products in the space.
IBB's 12-month trailing dividend yield is 0.31%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
IBB's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
Looking at individual holdings, Vertex Pharmaceuticals Inc (VRTX) accounts for about 8.77% of total assets, followed by Amgen Inc (AMGN) and Gilead Sciences Inc (GILD).
IBB's top 10 holdings account for about 49.99% of its total assets under management.
Performance and Risk
So far this year, IBB has lost about -5.12%, and is down about -7.19% in the last one year (as of 06/18/2025). During this past 52-week period, the fund has traded between $112.02 and $149.47.
IBB has a beta of 0.73 and standard deviation of 20.61% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 265 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 SPDR S&P Biotech ETF (XBI) tracks S&P Biotechnology Select Industry Index. First Trust NYSE Arca Biotechnology ETF has $997.69 million in assets, SPDR S&P Biotech ETF has $4.54 billion. FBT has an expense ratio of 0.56% 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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