Best Biotech ETFs for Q3 2022

FBT, BBH, and PBE are the best biotech ETFs for Q3 2022

Biotech companies use or modify biological processes to create new pharmaceuticals or therapies. Some of the most prominent biotech companies include Vertex Pharmaceuticals Inc. (VRTX) and Regeneron Pharmaceuticals Inc. (REGN).

Investing in the biotech sector can be risky. The scientific and regulatory issues involved with gaining approval from the U.S. Food and Drug Administration (FDA) can be substantial, making it risky and difficult to predict which biotech stocks will outperform.

One of the easiest ways to invest in the sector is through biotech exchange-traded funds (ETFs). These funds have holdings in a large array of biotech companies, offering investors a well-diversified portfolio in one easy-to-execute trade.

Key Takeaways

  • The biotech sector dramatically underperformed the broader market over the past year.
  • The biotech exchange-traded funds (ETFs) with the best one-year trailing total returns are FBT, BBH, and PBE.
  • The top holding of the first of these ETFs is Grifols S.A., and the top holding of both the second and third funds is Amgen Inc.

There are 10 biotech ETFs that trade in the United States, excluding inverse and leveraged ETFs as well as funds with less than $50 million in assets under management (AUM). The biotech sector, as measured by the Nasdaq Biotechnology Index, has dramatically underperformed the broader market with a total return of -23.7% over the past 12 months compared with the S&P 500’s total return of -1.9%, as of May 12, 2022. The best-performing biotech ETF, based on one-year trailing total return, is the First Trust NYSE Arca Biotechnology Index Fund (FBT).

We examine the top three biotech ETFs below. All numbers are as of May 13, 2022.

First Trust NYSE Arca Biotechnology Index Fund (FBT)

  • Performance Over One Year: -16.1%
  • Expense Ratio: 0.55%
  • Annual Dividend Yield: N/A
  • Three-Month Average Daily Volume: 46,023
  • Assets Under Management: $1.2 billion
  • Inception Date: June 19, 2006
  • Issuer: First Trust

FBT aims to track the NYSE Arca Biotechnology Index, an equal-dollar-weighted index designed to gauge the performance of biotech companies primarily involved in the use of biological processes to develop products or offer services. The ETF is focused on a narrow segment of the healthcare industry, providing exposure to biotech companies that use biological processes, such as recombinant DNA technology, molecular biology, genetic engineering, and genomics to develop medicines and therapies.

The fund invests in primarily growth stocks of various market capitalizations. Its top three holdings are sponsored American depository receipts (ADRs) Class B of Grifols S.A. (GRFS), a Spanish pharmaceutical company known for its blood plasma-based products; Gilead Sciences Inc. (GILD), a biopharmaceutical company focused on advancing medicines to prevent and treat diseases such as HIV, viral hepatitis, and cancers; and Amgen Inc. (AMGN), a biotechnology company that develops and manufactures various human therapeutics.

VanEck Biotech ETF (BBH)

  • Performance Over One Year: -17.4%
  • Expense Ratio: 0.35%
  • Annual Dividend Yield: 0.32%
  • Three-Month Average Daily Volume: 21,173
  • Assets Under Management: $403.7 million
  • Inception Date: Dec. 20, 2011
  • Issuer: VanEck

BBH aims to track the MVIS U.S. Listed Biotech 25 Index, which is designed to measure the performance of companies involved in the development and production of drugs based on genetic analysis and diagnostic equipment. The market cap-weighted ETF offers targeted exposure to the biotech industry. It is primarily focused on U.S.-based companies but allocates some of its holdings to biotech companies located in certain European countries and China.

The fund primarily invests in growth stocks of companies with various market caps. Its top three holdings are Amgen and Gilead Sciences, both described above, and Vertex Pharmaceuticals Inc. (VRTX), a biotech company focused on developing therapies for treating serious and genetic diseases, such as cystic fibrosis.

Invesco Dynamic Biotechnology & Genome ETF (PBE)

  • Performance Over One Year: -20.0%
  • Expense Ratio: 0.59%
  • Annual Dividend Yield: N/A
  • Three-Month Average Daily Volume: 10,414
  • Assets Under Management: $193.4 million
  • Inception Date: June 23, 2005
  • Issuer: Invesco

PBE offers exposure to the biotech subsector of the U.S. healthcare industry, serving up access to a group of stocks that can thrive on technological breakthroughs and increased investment in medical processes. PBE is part of the suite of Dynamic ETFs from PowerShares, using quant-based screening to identify component companies that may be poised for outperformance relative to a broad-based universe.

As such, the portfolio of this ETF is considerably more limited than the iShares Biotechnology ETF (IBB), which includes more than 100 individual names. That feature can be particularly important in the biotech space, where company-specific developments can send a single stock soaring.

PBE’s top three holdings are Amgen, described above; Incyte (INCY), a U.S. biopharmaceutical company focused on finding solutions for serious unmet medical needs through the development and commercialization of proprietary therapeutics; and Vertex Pharmaceuticals, described above.

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Article Sources
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  2. YCharts. “Financial Data.”

  3. VettaFi (formerly ETF Database). “ETF Screener.”

  4. First Trust. “First Trust NYSE® Arca® Biotechnology Index Fund (FBT).”

  5. VettaFi (formerly ETF Database). “FBT: First Trust NYSE Arca Biotechnology Index Fund.”

  6. VanEck. “BBH: VanEck Biotech ETF.”

  7. VettaFi (formerly ETF Database). “BBH: VanEck Biotech ETF.”

  8. Invesco. “Invesco Dynamic Biotechnology & Genome ETF.”

  9. VettaFi (formerly ETF Database). “PBE: Invesco Dynamic Biotechnology & Genome ETF.”

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