Equity: U.S. Health Care

HCRF Top Performer Intra-day
Price $30.56
Today’s Change +0.27%(0.89)
4:00pm 09/07/2017
PTH Bottom Performer Intra-day
Price $65.44
Today’s Change -0.42%(-0.64)
3:13pm 09/22/2017
  • Overview
  • Efficiency
  • Tradability
  • Fit

ETF.com Insight

Since the Supreme Court confirmation of the Affordable Care Act, many investors have been looking to the healthcare sector. It serves as a demographics-driven defensive play with babyXLV, VHT and IYH are three established funds that dominate the segment in assets boomers aging in our “pill-popping” nation and multinational mega-caps that stand to benefit from growth overseas. ETFs in the segment hold a broad array of US pharmaceutical, biotech and health care companies. Of the eight ETFs currently available, XLV, VHT and IYH are the three established, plain-vanilla funds that dominate the segment in total assets.
XLV, VHT and IYH are all cap-weighted and hold mostly the same 10 companies in their top holdings. You can also add newcomer FHLC to that list, as it tracks the same MSCI index as VHT and has attracted a significant asset base since launching in 2013. The concentrated nature of the market means all four funds are also very top heavy in the big pharma names that dominate the industry like Johnson & Johnson, Pfizer and Merck. XLV is the granddaddy here; trading since December 1998, it has amassed over $10B in total assets. It's also third cheapest in the segment.
VHT and FHLC have the widest scope, holding 300+ companies each, stretching across multiple health care subsectors. They are also the two cheapest choices. Meanwhile, IYH provides the most market-like exposure, albeit at a high cost that hasn't come down even as other funds have jockeyed for the position of low-cost leader.
Alternatives include FXH, a popular alpha-seeker that tracks a quant-driven index with a portfolio that skips the big pharma names in its top holdings, similar to PTH. RYH is an equal-weighted version of XLV, while PSCH specifically targets small-cap companies in the sector. (Insight updated 09/22/17)

All Funds (12)

VHT $7.1 B 7100133870.85 Broad, cheap coverage

A 97
E
98
98
T
99
99
F
97
97

FHLC $852.24 M 852237850 Broad coverage with lowest fee

A 96
E
99
99
T
98
98
F
96
96

IYH $2.09 B 2091627780 Broad-based

A 95
E
92
92
T
97
97
F
95
95

XLV $18.62 B 18623476668.304 Dominates in AUM and liquidity

A 90
E
97
97
T
99
99
F
90
90

RYH $657.44 M 657435000 Equal-weight

A 80
E
92
92
T
94
94
F
80
80

FXH $1.04 B 1038641834.452 Alpha-seeking

A 62
E
90
90
T
97
97
F
62
62

PSCH $225.89 M 225886650 Small-cap focus

A 41
E
95
95
T
77
77
F
41
41

PTH $144.89 M 144894200 high holding costs

B 21
E
88
88
T
78
78
F
21
21

JHMH $36.46 M 36457320 broad-based health care

C 87
E
85
85
T
62
62
F
87
87

HCRF $15.23 M 15225900 N/A

C 76
E
85
85
T
63
63
F
76
76

BTEC $7.66 M 7657755.6309 N/A

C 20
E
81
81
T
58
58
F
20
20

XH $894.59 K 894585.782 N/A

F 45
E
54
54
T
38
38
F
45
45

ETF.com Grade as 09/14/17

Equity: U.S. Health Care

Performance  [as of 09/21/17] 1 Month 3 Month YTD 1 Year 3 Years 5 Years 10 Years
Benchmark: Thomson Reuters US Healthcare--------------
A 96.500999VHT7100133870.85VHTVanguard Health Care ETF4.83%2.61%20.85%14.63%10.10%17.35%11.29%
A 96.425489FHLC852237850FHLCFidelity MSCI Health Care Index ETF4.84%2.57%20.93%14.53%9.99%----
A 95.044912IYH2091627780IYHiShares U.S. Healthcare ETF4.65%2.69%19.93%14.18%9.44%16.73%10.94%
A 90.250833XLV18623476668.304XLVHealth Care Select Sector SPDR Fund4.51%2.66%19.68%13.84%9.55%17.07%10.64%
A 79.784961RYH657435000RYHGuggenheim S&P 500 Equal Weight Healthcare ETF3.28%0.09%19.82%11.98%10.46%18.05%12.52%
A 61.610568FXH1038641834.452FXHFirst Trust Health Care AlphaDEX Fund2.78%-0.58%16.77%9.92%5.40%15.38%12.66%
A 41.166584PSCH225886650PSCHPowerShares S&P SmallCap Health Care Portfolio4.94%2.98%21.76%17.25%17.98%19.61%--
B 21.304442PTH144894200PTHPowerShares DWA Healthcare Momentum Portfolio8.22%8.16%37.21%23.03%9.05%14.13%8.49%
C 86.631595JHMH36457320JHMHJohn Hancock Multifactor Healthcare ETF3.62%0.89%17.93%12.38%------
C 76.49453HCRF15225900HCRFiShares Edge MSCI Multifactor Healthcare ETF2.99%1.05%21.19%18.26%------
C 20.474969BTEC7657755.6309BTECPrincipal Healthcare Innovators Index ETF11.29%5.76%32.43%15.34%------
F 44.563003XH894585.782XHElkhorn S&P MidCap Health Care Portfolio0.43%-1.28%17.38%--------
All returns over 1 year are annualized. All returns are total returns unless otherwise stated.

ETF.com Efficiency Insight

Following several fee cuts, three funds have emerged as the low-cost leaders in the US healthcare segment: VHT, FHLC and XLV. Of these, VHT sees the best tracking—and therefore theVHT's biggest shortfall in Efficiency comes from its lack of transparency lowest "real world" cost—thanks to Vanguard's 100% rebate of all securities-lending revenue back to the fund. VHT’s biggest shortfall in Efficiency comes from its lack of transparency—like all Vanguard funds, it updates its holdings monthly instead of daily.
All three of the cheapest funds follow plain-vanilla, cap-weighted strategies. A fourth plain-vanilla option, iShares' IYH, launched in the year 2000 and hasn't kept up with the times; its fee is several multiples more than what its competitors charge. Worse, it's tended to lag its index by even more than its fee.
Of the remaining funds, PSCH gets a nod for delivering on its core objectives. It charges less than any other non-vanilla fund, and its position as the sole small-cap fund in the sector gives it a unique competitive advantage. FXH lags behind the rest of the pack in Efficiency, as it's the segment's most expensive option. Investors are paying up for the fund’s rigorous alpha-seeking methodology, but the strategy's high turnover has resulted in significant drag versus the index.
All funds here have large, stable asset bases, so we see no elevated closure risk. (Insight updated 09/22/17)

All Funds (12)

99
98.826509
98
98.26602
97
97.496145
95
95.450363
92
92.191323
92
92.017823
90
89.834187
88
88.391835
85
85.189309
85
84.72841
81
81.41914
54
54.048649

ETF.com Grade as 09/14/17

Equity: U.S. Health Care

Tracking Difference (12 Month)

Ticker Expense Ratio Median Max. Upside Max. Downside Max LT/ST Cap Gains Rate Rule Legal Structure Fund Closure Risk Efficiency
FHLC Fidelity MSCI Health Care Index ETF 0.08% -0.09% -0.00% -0.14% 20.00% / 39.60% Low 98.826509
FXH First Trust Health Care AlphaDEX Fund 0.61% -0.67% -0.53% -0.73% 20.00% / 39.60% Low 89.834187
IYH iShares U.S. Healthcare ETF 0.44% -0.43% -0.35% -0.51% 20.00% / 39.60% Low 92.017823
JHMH John Hancock Multifactor Healthcare ETF 0.50% -0.50% -0.38% -0.56% 20.00% / 39.60% Medium 85.189309
PSCH PowerShares S&P SmallCap Health Care Portfolio 0.29% -0.26% -0.22% -0.31% 20.00% / 39.60% Low 95.450363
PTH PowerShares DWA Healthcare Momentum Portfolio 0.60% -0.80% -0.75% -0.89% 20.00% / 39.60% Low 88.391835
RYH Guggenheim S&P 500 Equal Weight Healthcare ETF 0.40% -0.45% -0.36% -0.51% 20.00% / 39.60% Low 92.191323
VHT Vanguard Health Care ETF 0.10% -0.08% -0.02% -0.12% 20.00% / 39.60% Low 98.26602
XLV Health Care Select Sector SPDR Fund 0.14% -0.16% -0.11% -0.21% 20.00% / 39.60% Low 97.496145
HCRF iShares Edge MSCI Multifactor Healthcare ETF 0.35% -- -- -- 20.00% / 39.60% High 84.72841
BTEC Principal Healthcare Innovators Index ETF 0.42% -- -- -- 20.00% / 39.60% High 81.41914
XH Elkhorn S&P MidCap Health Care Portfolio -- -- -- 20.00% / 39.60% Closing 54.048649

ETF.com Tradability Insight

The U.S. Healthcare segment has a multitude of highly liquid funds that attract huge daily volumes. XLV is in a class of its own and the outright winner within the segment when it comes toXLV is in a class of its own within the segment when it comes to Tradability. Tradability. The fund’s average spreads are just a penny, and XLV dwarfs its competitors in median traded volume. It’s the obvious choice for institutions and traders most concerned about liquidity.
VHT, IYH and FXH also score well here. While not on the same level as XLV, all three should pose no issues for the average investor not trading huge lots frequently. Underlying liquidity in these funds is also deep, so block trading through a liquidity provider should be relatively easy and cost efficient. Still, spreads are wide enough to make limit orders important. RYH and FHLC also have ample liquidity, but wider spreads.
PSCH and PTH lag somewhat in Tradability, so investors should use caution when trading these funds. Both funds see robust, if modest liquidity, but wider spreads will increase the costs of working with these two funds.
All funds in the segment see great block liquidity, so block trading should be relatively cheap and easy through a liquidity provider. (Insight updated 09/22/17)

All Funds (12)

99
99.279118
99
98.586231
98
97.817329
97
97.410869
97
97.327554
94
93.902032
78
77.694496
77
76.74262
63
62.779346
62
61.58388
58
57.995451
38
37.708527

ETF.com Grade as 09/14/17

Equity: U.S. Health Care

Ticker Median Daily Volume ($) Average Spread Creation Unit/Day Market Hours Overlap Underlying Volume/Unit % Creation Cost Per Unit (%) Impediment to Creations Score - Tradability
FHLC Fidelity MSCI Health Care Index ETF $3.86 M 0.06% 1.98 100.00% 0.01% 0.04% None 97.817329
FXH First Trust Health Care AlphaDEX Fund $4.3 M 0.06% 1.26 100.00% 0.07% 0.01% None 97.410869
IYH iShares U.S. Healthcare ETF $6.08 M 0.03% 0.72 100.00% 0.07% 0.00% None 97.327554
JHMH John Hancock Multifactor Healthcare ETF $38.14 K 0.32% 0.02 100.00% 0.01% 0.03% None 61.58388
PSCH PowerShares S&P SmallCap Health Care Portfolio $706.3 K 0.19% 0.16 100.00% 0.73% 0.01% None 76.74262
PTH PowerShares DWA Healthcare Momentum Portfolio $733.98 K 0.30% 0.23 100.00% 0.22% 0.02% None 77.694496
RYH Guggenheim S&P 500 Equal Weight Healthcare ETF $2.08 M 0.06% 0.24 100.00% 0.10% 0.01% None 93.902032
VHT Vanguard Health Care ETF $21.53 M 0.04% 5.64 100.00% 0.03% 0.02% None 98.586231
XLV Health Care Select Sector SPDR Fund $515.66 M 0.01% 125.81 100.00% 0.04% 0.01% None 99.279118
HCRF iShares Edge MSCI Multifactor Healthcare ETF $21.54 K 0.26% 0.01 100.00% 0.03% 0.01% None 62.779346
BTEC Principal Healthcare Innovators Index ETF $9.3 K 0.36% 0.00 100.00% 0.06% 0.04% None 57.995451
XH Elkhorn S&P MidCap Health Care Portfolio $0 0 100.00% 0.09% 0.06% None 37.708527

ETF.com/ Block Liquidity

FHLC
5
4
3
2
1
FXH
5
4
3
2
1
IYH
5
4
3
2
1
JHMH
5
4
3
2
1
PSCH
5
4
3
2
1
PTH
5
4
3
2
1
RYH
5
4
3
2
1
VHT
5
4
3
2
1
XLV
5
4
3
2
1
HCRF
5
4
3
2
1
BTEC
5
4
3
2
1
XH
5
4
3
2
1

This measurement shows how easy it is to trade 25,000 shares of each ETF.

ETF.com Fit Insight

One of the overriding challenges facing health care ETFs in Fit is the industry’s lopsided concentration in a handful of mega-cap pharmaceutical companies (just three make up moreVHT and FHLC stretch across multiple out-of-sector industries, including insurers than half the total market-cap). Four funds—FHLC, IYH, VHT and XLV compete for best-in-class Fit score. For the most part, all four track broad, market-cap-weighted indices and have weighted average market caps very close to our neutral benchmark, with similar tilts in sector, size splits and volatility.
VHT and FHLC track similar MSCI indices and hold the broadest portfolios in the segment, with over 300 names each. They stretch across multiple out-of-sector industries, including insurers, making them perhaps more diversified than investors may want. Segment giant XLV is also cap weighted, but its limited selection universe (the S&P 500) means it only holds a few dozen companies and has a large-cap tilt. Still, in an industry so heavily weighted in mega-caps, XLV scores exceptionally well in Fit.
The remaining four funds don't Fit the neutral market as closely due to their alternative indexing strategies. They're different enough to warrant an in-depth look, not a default allocation. RYH is an equal-weighted version of XLV and has significant holdings-overlap with the benchmark, but its weighting scheme tilts it towards midcaps. PSCH scores low in Fit by design—it’s a small-cap fund being measured against an industry dominated by mega-cap pharma. PSCH tilts extremely small compared to our neutral benchmark. (Insight updated 09/22/17)

All Funds (12)

97
96.500999
96
96.425489
95
95.044912
90
90.250833
87
86.631595
80
79.784961
76
76.49453
62
61.610568
41
41.166584
21
21.304442
20
20.474969
45
44.563003

ETF.com Grade as 09/14/17

Equity: U.S. Health Care