The biotechnology sector seems poised to profit off of the emerging vaccines, treatments, and biomedical devices associated with the global COVID19 pandemic, but there are, of course, no guarantees.
Highly risk-tolerant investors who believe biotechnology will continue to grow in 2021 should consider mutual funds that have a high portfolio allocation to the biotech sector. These mutual biotechnology funds provide professionally managed exposure to the sector and help minimize costs while investing in many stocks related to biotech, pharmaceuticals, and healthcare.
Here we look at 5 top biotech mutual funds going into 2021. All data as of November 6, 2020.
- Biotech buying interest has spread due to COVID-focused companies into the rest of the sector.
- While biotechs are traditionally risky ventures, mutual funds that specialize in the sector can provide diversification and professional portfolio management.
1. Fidelity Select Biotechnology Portfolio (FBIOX)
The fund seeks capital appreciation by investing primarily in companies involved in biotechnology-related activities. Under normal market conditions, the Fidelity Select Biotechnology Portfolio invests at least 80% of its total net assets of common stocks of companies involved in research, development, manufacturing, and distribution of various biotech products and services. The Fidelity Select Biotechnology Portfolio's top industry allocations are 91.47% to biotech and 4.90% to pharmaceuticals.
Fidelity Investments issued the Fidelity Select Biotechnology Portfolio on Dec. 16, 1985. As of November 6 2020, the fund has achieved a 10-year average annual return of 20.02% and has total portfolio assets of $7.4 billion. The fund has no minimum investment requirement and charges an annual net expense ratio of 0.72%.
2. T. Rowe Price Health Sciences Fund (PRHSX)
The T. Rowe Price Health Sciences Fund seeks to provide long-term capital appreciation by investing at least 80% of its total net assets in common stocks of companies involved in research, development, production, and distribution of products and services related to the health care, medicine, and life sciences sectors.
The T. Rowe Price Health Sciences Fund was issued on Dec. 29, 1995, and currently manages $16.4 billion. As of November 2020, it has generated a trailing total return for a 10-year period of 20.44%. A minimum investment of $2,500 is required to invest in the fund, with an annual expense ratio of 0.76%.
While the T. Rowe Price Health Sciences Fund does not provide full exposure to the biotech sector, its top 10 holdings, equal to roughly one-third of its portfolio, contains familiar names in healthcare such as UnitedHealth Group Inc., Eli Lilly, and Vertex Pharmaceuticals.
3. Fidelity Advisor Biotechnology Fund - Class A (FBTAX)
The fund is a pure biotechnology fund; it allocates 94.13% of its total net assets to the biotech sector and 4.04% to the pharmaceuticals sector. As of November 2020, the Fidelity Advisor Biotechnology Fund has total net assets of $2.4 billion. Under normal circumstances, the fund invests at least 80% of its total net assets in common stocks of companies involved in developing, researching, manufacturing and distributing biotech-related products and services, as well as companies that benefit from advances in the biotech sector.
The Fidelity Advisor Biotechnology Fund - Class A was issued on Dec. 27, 2000, by Fidelity Investments. The fund has a YTD return of 18.53%, with an average five-year return of 6.93% and an average 10-year return of 19.03%. The fund charges an annual net expense ratio of 1.03% and does not have a minimum initial investment requirement.
4. Janus Henderson Global Life Sciences A (JFNAX)
The Janus Global Life Sciences Fund seeks to provide long-term capital appreciation by taking a balanced approach to investing across sub-sectors of companies that the portfolio manager deems to be related to the life sciences sector. The company invests in life science and biotech companies such as Merck and Co., Novartis AG, Humana Inc., AstraZeneca PLC, and others.
The Janus Global Life Sciences Fund was issued on Dec. 31, 1998, by Janus Capital Group. The fund charges an annual net expense ratio of 1% and requires a $2,500 minimum investment. As of November 2020, the fund has a YTD return of 15.59%, a five-year average return of 10.78%, and the 10-year average return of 17.79%. The fund stewards $4.3 billion AUM.
5. Franklin Biotechnology Discovery Fund (FBDIX)
The fund's objective is to provide investors with long-term capital appreciation. The fund attempts to achieve its objective by investing at least 80%, under normal market conditions, of its total net assets in common stocks of biotechnology and discovery research companies. The fund's top allocations are 77.11% to biotechnology, 11.10% to pharmaceuticals, and 7.07% to cash & cash equivalents.
The $1.3 billion AUM Franklin Biotechnology Discovery Fund was issued on Sept. 15, 1997, by Franklin Templeton Investments. The fund charges an annual net expense ratio of 1.03% and requires a minimum investment of $1,000. As of November 2020, the fund has generated a 10-year average annualized return of 16.75% and an average annualized return of 6.13% for the past five years.