If you're interested in broad exposure to the Healthcare - Biotech segment of the equity market, look no further than the First Trust NYSE Arca Biotechnology ETF FBT, a passively managed exchange traded fund launched on 06/19/2006.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Healthcare - Biotech is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 5, placing it in top 31%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $1.18 billion, making it one of the larger ETFs attempting to match the performance of the Healthcare - Biotech segment of the equity market. FBT seeks to match the performance of the NYSE Arca Biotechnology Index before fees and expenses.

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.

Costs

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 counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.56%, making it on par with most peer products in the space.

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.

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

Looking at individual holdings, Grifols, S.a. (adr) GRFS accounts for about 4% of total assets, followed by Ultragenyx Pharmaceutical Inc. RARE and Iqvia Holdings Inc. IQV.

The top 10 holdings account for about 36.19% of total assets under management.

Performance and Risk

The ETF has lost about -2.71% and is up about 0.50% so far this year and in the past one year (as of 04/01/2024), respectively. FBT has traded between $132.50 and $160.46 during this last 52-week period.

The ETF has a beta of 0.67 and standard deviation of 21.95% for the trailing three-year period, making it a high risk choice in the space. With about 31 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust NYSE Arca Biotechnology 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, FBT is a good 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.

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 $7.45 billion in assets, iShares Biotechnology ETF has $7.64 billion. XBI has an expense ratio of 0.35% and IBB charges 0.45%.

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.

Zacks Investment Research

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Should You Invest in the First Trust NYSE Arca Biotechnology ETF (FBT)? - TradingView