The best biotech ETFs allow you to invest in multiple firms developing ground-breaking treatments, cures, and vaccines.
There is a constant, global race between the largest biotech and pharmaceutical companies to discover and develop novel therapeutics.
While all stock investment has some degree of uncertainty, the complexity of the biotech product development process can make biotech stock investing seem particularly daunting.
But there is another choice: ETFs focused on the biotechnology industry.
It has been a difficult year for the best biotech ETFs. Many private banking clients in the UK are exploring investment opportunities in the biotech sector, and they often turn to the best biotech ETFs as a way to diversify their investment funds.
Biotechnology is a rapidly growing subject that has the potential to continue expanding in the next years, thus the long-term outlook is still optimistic for the innovative healthcare sector.
You may also want to invest in airline ETFs, artificial intelligence ETFs, and defense ETFs.
If you want to invest as an expat or high-net-worth individual, you can email me (advice@adamfayed.com) or use these contact options.
What is a Biotech ETF?
ETFs that follow an index of publicly traded biotechnology businesses are known as biotech ETFs. Biotechnology firms typically create novel pharmaceuticals, vaccines, and medical devices by employing biological processes.
Thus, biotechnology ETFs provide a mechanism for investors to gain exposure to the biotechnology industry without the hassle of selecting specific stocks.
Almost any sort of investor can participate because biotech ETFs are so easily accessible and reasonably priced.
Like stocks, ETFs can be bought and sold at any time throughout the trading day. In addition, ETFs are more budget-friendly than mutual funds because their management fees are lower.
How Biotech ETFs Work
The best biotech ETFs facilitate diversified portfolio investing in the healthcare industry.
ETFs are similar to stocks in that both can be bought and sold during the trading day.
When you invest in an ETF, your money is distributed among several different companies, reducing your exposure to any one company’s performance.
When you invest in a single stock, you are gambling on the success of a single firm.
Funds that follow indexes invest in all of the stocks that make up a certain segment of the stock market, so investors are spared the extra cost associated with having a manager select securities for them (the “expense ratio” of an ETF).
When might investors, then, prefer biotech ETFs to more broadly diversified ETFs or funds that follow other sectors?
Pandemics like the one caused by the coronavirus could highlight the importance of the work being done by biotech firms in the areas of disease prevention, diagnosis, treatment, and cure.
Stock prices in the industry as a whole may rise if new products attract more media coverage and if retail and institutional investors rush to buy shares of companies that stand to profit from those innovations.
Below are the best biotech ETFs of 2023 based on their year-to-date returns.
What are the Best Biotech ETFs?
iShares Global Healthcare ETF (NYSE:IXJ)
The iShares Global Healthcare ETF (NYSE: IXJ) tracks the S&P Global 1200 Healthcare Sector Index, which includes pharmaceutical, biotechnology, and medical device businesses.
As of August 1, 2023, the ETF had $4 billion in net assets and a 0.42% cost ratio. The fund owns 112 stocks.
Investors should watch the iShares Global Healthcare ETF (NYSE: IXJ), a top-performing biotechnology ETF.
UnitedHealth Group Incorporated, a major American healthcare company, is the largest holding in the iShares Global Healthcare ETF, traded on the New York Stock Exchange as UNH and IXJ.
On July 14, UnitedHealth Group Incorporated (NYSE:UNH) reported $6.14 second-quarter non-GAAP EPS, $0.16 over market estimate.
The company’s revenue rose 15.6% to $92.9 billion. This performance beat Wall Street projections by $1.94 billion.
Based on the first quarter database, it has been observed that Rajiv Jain’s GQG Partners holds the dominant position in UnitedHealth Group Incorporated (NYSE:UNH), possessing 4.8 million shares valued at $2.28 billion.
UnitedHealth Group Incorporated (NYSE:UNH) is among the leading biotech stocks that merit consideration, similar to Eli Lilly and Company (NYSE:LLY), Pfizer Inc. (NYSE:PFE), and AbbVie Inc. (NYSE:ABBV).
Franklin Genomic Advancements ETF (BATS:HELX)
The Franklin Genomic Advancements ETF (BATS:HELX) was launched by Franklin Templeton on February 25, 2020 as an actively managed investment fund.
The primary focus of this investment strategy lies in allocating resources towards companies that are anticipated to benefit from developments in genomic-based research techniques and technology.
The ETF presents an expense ratio of 0.50% and consists of a portfolio consisting of 58 individual equities.
The Franklin Genomic Advancements ETF (BATS:HELX) demonstrates strong potential as a top-performing biotech ETF over a 5-year period.
Thermo Fisher Scientific Inc., listed as TMO on the New York Stock Exchange, holds the position of the largest holding inside the Franklin Genomic Advancements ETF, which is traded on the BATS exchange under the ticker symbol HELX.
Thermo Fisher Scientific Inc. (NYSE:TMO) provides a diverse array of global solutions in the fields of life sciences, analytical equipment, speciality diagnostics, laboratory goods, and biopharmaceutical services.
Thermo Fisher Scientific Inc. (NYSE:TMO) announced a quarterly dividend of $0.35 per share on July 13, consistent with its prior dividend payouts.
The dividend will be distributed on October 13th to stockholders who are officially registered as of September 15th.
According to first quarter database, more hedge funds were optimistic about Thermo Fisher Scientific Inc. (NYSE:TMO).
There were 98 optimistic hedge funds, up from 92 the previous quarter. Generation Investment Management, led by David Blood and Al Gore, owns the most shares, 1.4 million, worth $854.8 million.
First Trust Health Care AlphaDEX Fund (NYSE:FXH)
The First Trust Health Care AlphaDEX Fund (NYSE:FXH) is designed to replicate the performance of the StrataQuant Health Care Index, with the objective of attaining investment outcomes that closely resemble its price and yield, without any associated fees and expenditures.
The ETF was established on May 8, 2005, and now maintains a total of $1.5 billion in net assets. As of August 1, 2023, the ETF’s expense ratio is at 0.61%.
The portfolio of the fund comprises 85 individual stocks. The First Trust Health Care AlphaDEX Fund (NYSE:FXH) is considered to be a highly favourable choice for investment in the biotechnology sector.
United Therapeutics Corporation (NASDAQ:UTHR) dominates the First Trust Health Care AlphaDEX Fund (NYSE:FXH).
United Therapeutics Corporation (NASDAQ:UTHR) is a biotechnology company that develops and sells medical solutions for chronic and life-threatening disorders.
United Therapeutics Corporation (NASDAQ:UTHR) reported second-quarter earnings on August 2.
Wall Street analysts expected $5.24 GAAP EPS and $596.5 million in revenue, but the business exceeded them by $0.75 and $72.33 million.
Based on the first quarter database, it was seen that there was an increase in optimistic sentiment towards United Therapeutics Corporation (NASDAQ:UTHR) among hedge funds.
Specifically, the number of hedge funds with a positive outlook on the company rose from 49 in the previous quarter to 51. Kurt Von Emster, through his affiliation with VenBio Select Advisor, holds the majority ownership in the company, with 2.87 million shares valued at $642.7 million.
VanEck Biotech ETF (NASDAQ:BBH)
The objective of the VanEck Biotech ETF (NASDAQ:BBH) is to accurately replicate the price and yield performance of the MVIS US-Listed Biotech 25 Index.
The purpose of this index is to assess the entire performance of enterprises involved in the development, production, marketing, and sales of pharmaceuticals utilizing genetic analysis and diagnostic equipment.
The VanEck Biotech ETF (NASDAQ:BBH) was founded on December 20, 2011. As of August 1, 2023, it currently possesses a net asset value of $484.95 million, accompanied by an expense ratio of 0.35%. This particular biotech ETF is considered to be among the top options for investment.
Amgen Inc. (NASDAQ:AMGN) represents the principal position within the VanEck Biotech ETF (NASDAQ:BBH).
Amgen Inc. (NASDAQ:AMGN) is a global company engaged in the development, manufacturing, and distribution of pharmaceutical products for human therapies on a worldwide scale.
The main areas of concentration encompassed by this field are inflammation, oncology/haematology, bone health, cardiovascular disease, nephrology, and neuroscience.
Amgen Inc. (NASDAQ:AMGN) announced a quarterly dividend of $2.13 per share on August 1, which is consistent with its prior dividend payouts.
The dividend will be disbursed on September 8th to stockholders who are officially registered as of August 18th.
Based on the first quarter database, it was seen that there was a decrease in the number of hedge funds expressing a positive sentiment towards Amgen Inc. (NASDAQ:AMGN), with 57 funds being bullish in the current quarter compared to 60 funds in the previous quarter.
The investment firm Two Sigma Advisors, led by John Overdeck and David Siegel, holds the largest interest in the company, with a total of 1.6 million shares valued at $404.4 million.
Virtus LifeSci Biotech Products ETF (NYSE:BBP)
The Virtus LifeSci Biotech Products ETF (NYSE:BBP) tracks the price and yield of the LifeSci Biotechnology Products Index, which includes publicly traded US biotechnology companies.
The NYSE:BBP Virtus LifeSci Biotech Products ETF was founded on December 17, 2014. On August 1, 2023, the ETF managed $19.34 million in assets with a 0.79% cost ratio. The ETF has 57 stocks and a 0.20% distribution yield.
BridgeBio Pharma, Inc. (NASDAQ:BBIO) leads the Virtus LifeSci Biotech Products ETF (NYSE:BBP). The company researches, develops, and distributes genetic disease drugs.
BridgeBio Pharma, Inc. (NASDAQ:BBIO) stock rose 80% on July 17. This increase was caused by the company’s public announcement to seek US regulatory approval for ceramides before the end of the year.
The decision was based on promising Phase 3 evidence of the drug’s efficacy in treating transthyretin amyloid cardiomyopathy.
Based on the first quarter database, it was observed that there was an increase in the number of hedge funds expressing a positive outlook on BridgeBio Pharma, Inc. (NASDAQ:BBIO).
Specifically, the number of optimistic hedge funds rose from 28 in the previous quarter to 44.
Viking Global, managed by Andreas Halvorsen, holds the largest investment in the company, possessing 26.6 million shares valued at $441.3 million.
Final Thoughts
The best biotech ETFs provide investors with a way to gain exposure to the industry’s explosive growth without taking on the full risks of buying individual biotech firms.
Investors should be aware, however, that biotech stocks tend to be more volatile than other market sectors in the short term.
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