Equity: U.S. Health Care

BTEC Top Performer Intra-day
Price $30.46
Today’s Change +0.39%(1.30)
10:54am 11/24/2017
JHMH Bottom Performer Intra-day
Price $30.40
Today’s Change 0.00%(0.00)
4:00pm 11/22/2017
  • 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 11/22/17)

All Funds (12)

VHT $7.07 B 7068056083.06 Broad, cheap coverage

A 97
E
98
98
T
99
99
F
97
97

FHLC $883.65 M 883651500 Broad coverage with lowest fee

A 97
E
100
100
T
98
98
F
97
97

IYH $2.07 B 2072586010 Broad-based

A 95
E
92
92
T
99
99
F
95
95

XLV $17.3 B 17295168361.078 Dominates in AUM and liquidity

A 90
E
99
99
T
99
99
F
90
90

RYH $647.77 M 647770100 Equal-weight

A 78
E
93
93
T
94
94
F
78
78

FXH $978.98 M 978982334.568 Alpha-seeking

A 66
E
90
90
T
98
98
F
66
66

PSCH $248.93 M 248930400 Small-cap focus

A 36
E
96
96
T
74
74
F
36
36

PTH $157.55 M 157552300 high holding costs

B 22
E
89
89
T
84
84
F
22
22

JHMH $34.79 M 34788880 broad-based health care

C 87
E
85
85
T
64
64
F
87
87

HCRF $17.18 M 17183925 N/A

C 74
E
85
85
T
63
63
F
74
74

BTEC $44.93 M 44932079.9547 N/A

C 19
E
86
86
T
55
55
F
19
19

XH $894.59 K 894585.782 N/A

F 45
E
54
54
T
38
38
F
45
45

ETF.com Grade as 11/16/17

Equity: U.S. Health Care

Performance  [as of 11/21/17] 1 Month 3 Month YTD 1 Year 3 Years 5 Years 10 Years
Benchmark: Thomson Reuters US Healthcare-3.34%4.70%20.76%19.56%8.58%17.89%--
A 96.771392VHT7068056083.06VHTVanguard Health Care ETF-2.42%5.14%21.21%19.57%8.36%17.97%11.56%
A 96.75387FHLC883651500FHLCFidelity MSCI Health Care Index ETF-2.42%5.16%21.30%19.58%8.29%----
A 94.751022IYH2072586010IYHiShares U.S. Healthcare ETF-2.29%5.09%20.44%18.92%7.82%17.37%11.18%
A 90.491098XLV17295168361.078XLVHealth Care Select Sector SPDR Fund-2.71%4.55%19.72%18.51%7.72%17.44%10.91%
A 78.225132RYH647770100RYHGuggenheim S&P 500 Equal Weight Healthcare ETF-2.24%4.08%20.75%18.89%8.31%18.66%12.88%
A 65.685393FXH978982334.568FXHFirst Trust Health Care AlphaDEX Fund-1.49%3.92%18.06%15.70%4.61%16.12%12.98%
A 35.683221PSCH248930400PSCHPowerShares S&P SmallCap Health Care Portfolio2.70%13.24%31.39%32.70%19.09%23.50%--
B 22.1557PTH157552300PTHPowerShares DWA Healthcare Momentum Portfolio2.11%14.39%45.04%37.97%10.02%16.27%9.33%
C 86.676507JHMH34788880JHMHJohn Hancock Multifactor Healthcare ETF-2.32%3.83%18.17%16.93%------
C 73.791863HCRF17183925HCRFiShares Edge MSCI Multifactor Healthcare ETF0.19%6.60%25.43%25.54%------
C 18.950477BTEC44932079.9547BTECPrincipal Healthcare Innovators Index ETF-1.42%9.85%30.73%17.35%------
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 11/22/17)

All Funds (12)

100
99.938061
99
98.521429
98
98.299352
96
96.47423
93
93.232268
92
92.022954
90
90.084351
89
89.292176
86
86.328304
85
85.137245
85
84.933538
54
54.048649

ETF.com Grade as 11/16/17

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% -0.10% -0.00% -0.16% 20.00% / 39.60% Low 99.938061
FXH First Trust Health Care AlphaDEX Fund 0.61% -0.68% -0.54% -0.82% 20.00% / 39.60% Low 90.084351
IYH iShares U.S. Healthcare ETF 0.44% -0.44% -0.36% -0.56% 20.00% / 39.60% Low 92.022954
JHMH John Hancock Multifactor Healthcare ETF 0.50% -0.50% -0.38% -0.56% 20.00% / 39.60% Medium 84.933538
PSCH PowerShares S&P SmallCap Health Care Portfolio 0.29% -0.27% -0.24% -0.32% 20.00% / 39.60% Low 96.47423
PTH PowerShares DWA Healthcare Momentum Portfolio 0.60% -0.80% -0.75% -0.89% 20.00% / 39.60% Low 89.292176
RYH Guggenheim S&P 500 Equal Weight Healthcare ETF 0.40% -0.46% -0.37% -0.53% 20.00% / 39.60% Low 93.232268
VHT Vanguard Health Care ETF 0.10% -0.08% -0.06% -0.12% 20.00% / 39.60% Low 98.299352
XLV Health Care Select Sector SPDR Fund 0.14% -0.16% -0.11% -0.23% 20.00% / 39.60% Low 98.521429
HCRF iShares Edge MSCI Multifactor Healthcare ETF 0.35% -- -- -- 20.00% / 39.60% High 85.137245
BTEC Principal Healthcare Innovators Index ETF 0.42% -- -- -- 20.00% / 39.60% Low 86.328304
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 11/22/17)

All Funds (12)

99
99.29978
99
98.600365
99
98.579877
98
98.023772
98
97.744881
94
93.773869
84
84.198495
74
74.319765
64
63.592193
63
62.967603
55
54.854107
38
37.708527

ETF.com Grade as 11/16/17

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 $4.47 M 0.06% 2.29 100.00% 0.01% 0.04% None 98.023772
FXH First Trust Health Care AlphaDEX Fund $3.51 M 0.06% 1.05 100.00% 0.06% 0.01% None 97.744881
IYH iShares U.S. Healthcare ETF $8.83 M 0.04% 1.04 100.00% 0.07% 0.00% None 98.579877
JHMH John Hancock Multifactor Healthcare ETF $47.91 K 0.25% 0.03 100.00% 0.01% 0.03% None 63.592193
PSCH PowerShares S&P SmallCap Health Care Portfolio $802.66 K 0.22% 0.17 100.00% 0.71% 0.01% None 74.319765
PTH PowerShares DWA Healthcare Momentum Portfolio $925.39 K 0.27% 0.27 100.00% 0.22% 0.01% None 84.198495
RYH Guggenheim S&P 500 Equal Weight Healthcare ETF $2.44 M 0.05% 0.28 100.00% 0.10% 0.01% None 93.773869
VHT Vanguard Health Care ETF $25.44 M 0.04% 6.62 100.00% 0.03% 0.02% None 98.600365
XLV Health Care Select Sector SPDR Fund $477.56 M 0.01% 117.36 100.00% 0.04% 0.01% None 99.29978
HCRF iShares Edge MSCI Multifactor Healthcare ETF $28.28 K 0.27% 0.02 100.00% 0.03% 0.01% None 62.967603
BTEC Principal Healthcare Innovators Index ETF $34.35 K 0.51% 0.02 100.00% 0.05% 0.04% None 54.854107
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 11/22/17)

All Funds (12)

97
96.771392
97
96.75387
95
94.751022
90
90.491098
87
86.676507
78
78.225132
74
73.791863
66
65.685393
36
35.683221
22
22.1557
19
18.950477
45
44.563003

ETF.com Grade as 11/16/17

Equity: U.S. Health Care