The SPDR S&P Biotech ETF (XBI) made its debut on 01/31/2006, 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?
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
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
Managed by State Street Global Advisors, XBI has amassed assets over $5.04 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 S&P Biotechnology Select Industry Index.
The S&P Biotechnology Select Industry Index represents the biotechnology 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 Biotech Index is a modified equal weight index.
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.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
It's 12-month trailing dividend yield comes in at 0.03%.
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.
XBI's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
When you look at individual holdings, Insmed Inc (INSM) accounts for about 3.29% of the fund's total assets, followed by Alnylam Pharmaceuticals Inc (ALNY) and Exact Sciences Corp (EXAS).
XBI's top 10 holdings account for about 27.56% of its total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Biotech ETF has lost about -2.42% so far, and is down about -6.86% over the last 12 months (as of 07/10/2025). XBI has traded between $69.80 and $104.18 in this past 52-week period.
The ETF has a beta of 0.86 and standard deviation of 29.73% for the trailing three-year period, making it a high risk choice in the space. With about 129 holdings, it effectively diversifies company-specific risk .
Alternatives
SPDR S&P Biotech 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 iShares Biotechnology ETF (IBB) tracks Nasdaq Biotechnology Index. First Trust NYSE Arca Biotechnology ETF has $1.03 billion in assets, iShares Biotechnology ETF has $5.52 billion. FBT has an expense ratio of 0.54% and IBB changes 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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SPDR S&P Biotech ETF (XBI): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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