Investing in the biotech industry can be a long road to gains given the sector’s volatility.
Even with a good understanding of the system, no one can predict which treatment, device or therapy will give the biggest return, making biotech exchange-traded funds (ETFs) a more secure option than individual biotech stocks.
An ETF is a relatively safe investment route that can minimize losses while offering exposure to multiple companies instead of focusing on the gains and losses of a single biotech stock. With that in mind, here’s a brief look at the five top biotechnology ETFs by total assets under management (AUM). Data was sourced from ETFdb.com on November 13, 2024, and all data was current as of that time.
1. SPDR S&P Biotech ETF (ARCA:XBI)
Total AUM: US$7.82 billion
Established on February 6, 2006, the SPDR S&P Biotech ETF is a largely balanced fund in terms of weight that focuses mostly on biotech companies with some pharmaceutical companies. As noted by ETF.com, it focuses on small- and micro-cap companies, which makes the weight of each holding smaller than the holdings of other ETFs in this sector.
The SPDR S&P Biotech ETF has 144 companies in its portfolio, with the top three being Incyte (NASDAQ:INCY) at a weight of 3.11 percent, United Therapeutics (NASDAQ:UTHR) at a weight of 2.86 percent and Gilead Sciences (NASDAQ:GILD) at 2.7 percent.
2. iShares NASDAQ Biotechnology ETF (NASDAQ:IBB)
Total AUM: US$7.33 billion
The iShares NASDAQ Biotechnology ETF was launched on February 5, 2001, and tracks 211 holdings. This iShares ETF is a diversified fund in that it provides exposure to biotechnology, pharmaceutical and life science tools and services. Its overarching investment goal is to track NASDAQ-listed companies focused on these areas.
Its top three holdings are: Gilead Sciences at a weight of 9.35 percent, Vertex Pharmaceuticals (NASDAQ:VRTX) at 8.02 percent and Amgen (NASDAQ:AMGN) at 7.76 percent.
3. ARK Genomic Revolution Multi-Sector ETF (ARCA:ARKG)
Total AUM: US$1.31 billion
The ARK Genomic Revolution Multi-Sector ETF came into existence on October 31, 2014, and tracks 38 holdings. This ETF follows companies that develop products such as CRISPR technology, bioinformatics, molecular diagnostics and stem cells.
This top biotechnology ETF’s three most significant company holdings are: CRISPR Therapeutics (NASDAQ:CRSP) at a weight of 7.05 percent, Recursion Pharmaceuticals (NASDAQ:RXRX) at a weight of 6.91 percent and Twist Bioscience (NASDAQ:TWST) at 8.57 percent.
4. First Trust NYSE Arca Biotechnology Index (ARCA:FBT)
Total AUM: US$1.21 billion
The First Trust NYSE Arca Biotechnology ETF entered the market on June 23, 2006, and aims to track the NYSE Arca Biotechnology Index as closely as it can. Companies in this fund are generally involved in areas such as recombinant DNA technology, molecular biology, genetic engineering and genomics.
The fund has only 31 holdings; this means they are largely equally weighted. The top three holdings of the fund are the following companies: Exelixis (NASDAQ:EXEL) at a 4.31 percent weight, Intra-Cellular Therapies (NASDAQ:ITCI) at 3.83 percent and Incyte (NASDAQ:INCY) at 3.8 percent.
Natera (NASDAQ:NTRA) at a 4.78 percent weight, Bruker (NASDAQ:BRKR) representing a 4.09 percent weight, and Halozyme Therapeutics (NASDAQ:HALO), coming in at a 3.89 percent weight.
5. Direxion Daily S&P Biotech Bull 3x Shares ETF (ARCA:LABU)
Total AUM: US$956.65 billion
Founded on May 28, 2015, the Direxion Daily S&P Biotech Bull 3x Shares ETF does not mirror an index. Instead, its goal is to obtain daily investment results of at least 300 percent of the S&P Biotechnology Select Industry Index.
The Direxion Daily S&P Biotech Bull 3x Shares ETF has 142 holdings. The top stocks in this ETF by weight are Incyte with a 2.96 percent weight, United Therapeutics with a weight of 2.71 percent and Gilead Sciences at a weight of 2.7 percent.
Securities Disclosure: I, Lauren Kelly, hold no direct investment interest in any company mentioned in this article.