Healthcare exchange-traded funds (ETFs) invest in a basket of stocks of companies that provide medical services, develop medical equipment or drugs, offer medical insurance, or facilitate the provision of healthcare to patients. Some notable companies in the healthcare sector include UnitedHealth Group Inc. (UNH), Pfizer Inc. (PFE), and Merck & Co. Inc. (MRK). Because the majority of healthcare services and products are necessities as opposed to luxuries, the healthcare industry is considered non-cyclical, which can make healthcare ETFs a strong defensive portfolio position.
- The healthcare sector outperformed the broader market over the past year.
- The ETFs with the best 1-year trailing total return are ARKG, KURE, and PTH.
- The top holdings of these ETFs are Invitae, Jiangsu Hengrui Medicine, and Novavax, respectively.
The healthcare ETF universe is comprised of about 30 distinct ETFs, excluding inverse and leveraged ETFs, as well as funds with less than $50 million in assets under management (AUM). As of August 13, 2020, the healthcare sector, as measured by the Health Care Select Sector SPDR ETF (XLV), has outperformed the broader market with a total return of 21.1% over the past 12 months compared to the S&P 500's total return of 19.7%. The best-performing healthcare ETF for Q4 2020, based on performance over the past year, is the ARK Genomic Revolution ETF (ARKG). We examine the top 3 best healthcare ETFs below. All figures below are as of August 14, 2020.
- Performance over 1-Year: 100.8%
- Expense Ratio: 0.75%
- Annual Dividend Yield: 3.64%
- 3-Month Average Daily Volume: 734,914
- Assets Under Management: $1.8 billion
- Inception Date: October 31, 2014
- Issuer: ARK Investment Management
An actively-managed multi-cap fund, ARKG has built a track record of consistently outperforming the market by identifying companies most likely to profit from the latest scientific advances. Examples of areas in which the company has invested include stem cell research, gene editing, genetic therapy, and molecular diagnostics. The fund is largely focused on growth stocks in the U.S. biotechnology sector, and its three largest holdings are Invitae Corp. (NVTA), a medical genetics company; CRISPR Therapeutics AG (CRSP), a Switzerland-based gene-editing medical company; and Illumina Inc. (ILMN), a provider of integrated systems for large-scale analysis of genetic variation and biological function.
- Performance over 1-Year: 71.9%
- Expense Ratio: 0.65%
- Annual Dividend Yield: 0.17%
- 3-Month Average Daily Volume: 69,657
- Assets Under Management: $105.9 million
- Inception Date: February 1, 2018
- Issuer: KraneShares
KURE is an ETF that focuses on stocks in China's healthcare sector. It tracks the MSCI China All Shares Health Care 10/40 Index, a free-float-adjusted index that is market-cap weighted. The fund invests in a mixture of companies ranging from small-cap to large-cap firms. Its top three holdings are Jiangsu Hengrui Medicine Co. Ltd. (600276), a China-based pharmaceutical company; WuXi Biologics (Cayman) Inc. (2269:HKG), a China-based developer of pharmaceutical products; and Shenzhen Mindray Bio-Medical Electronics Co. Ltd. (300760), a China-based manufacturer of medical equipment.
- Performance over 1-Year: 55.8%
- Expense Ratio: 0.60%
- Annual Dividend Yield: N/A
- 3-Month Average Daily Volume: 57,069
- Assets Under Management: $546.3 million
- Inception Date: October 12, 2006
- Issuer: Invesco
PTH is a multi-cap ETF focused on growth stocks in the U.S. healthcare sector. It tracks the Dynamic Healthcare Sector Intellidex Index, which is comprised of U.S. healthcare equities and seeks to provide capital appreciation by using quant-based filters to choose individual stocks. The fund tends to appeal to investors looking for a short-term tactical portfolio adjustment or as part of a sector rotation approach. The fund's top three holdings include Novavax Inc. (NVAX), a clinical stage biotechnology company; West Pharmaceutical Services Inc. (WST), a manufacturer of pharmaceuticals, biologics, vaccines, and consumer healthcare products; and Quidel Corp. (QDEL), a manufacturer of diagnostic healthcare products.