Equity: U.S. Health Care Providers & Services
The U.S. Health Care Providers & Services segment has long been dominated by IHF. With over 7 years of operating history and a substantial AUM, IHF was virtually unchallenged until SPDR
“IHF was virtually unchallenged until SPDR launched XHS” launched XHS in 2011. XHS is a cheaper, equal-weighted alternative to IHF's plain-vanilla market cap-weighted exposure.
Each fund differs in exposure to the various sectors within the Health Care Providers & Services segment—IHF's positions in managed health care and life & health insurance are roughly twice those of XHS's. Meanwhile, XHS allocates much more of its portfolio to healthcare facilities & services. Both funds tilt smaller than our benchmark, particularly XHS.
Although IHF charges more than XHS, it tracks its index better and is far more liquid, so all-in costs for the funds could easily be a wash depending on the holding period. Overall, IHF provides the most market-like exposure to the industry. Considering the combination of its exposure, high Efficiency and Tradability, IHF is our analyst pick for the segment. (Insight updated 02/27/17)
ETF.com Efficiency Insight
XHS charges less in management fees than IHF. Still, when considering IHF's excellent tracking of its index, total holding costs may be a wash between the two funds.
“XHS charges much less than IHF” places it safely in profitable territory. While XHS scores low in closure risk, its AUM should be monitored.
On the tax front, IHF has never paid out capital gains distributions since its 2006 launch. XHS, on the other hand, paid out short-term capital gains at the end of 2012 and again in 2014. (Insight updated 02/27/17)
ETF.com Tradability Insight
IHF crushes XHS on liquidity, trading at much higher median daily volumes and tighter spreads. Still, both funds should suffice for everyday buy-and-hold investors. Be sure to use limit
“IHF crushes XHS on liquidity.” orders and check iNAV before hitting the buy or sell button.
Both funds score well in block liquidity, though underlying volume is low enough that block trades are likely to move underlying prices. IHF might be easier to trade at the institutional level, due to its strong secondary liquidity that can facilitate large trades. (Insight updated 02/27/17)
ETF.com Fit Insight
Neither of the U.S. Health Care Providers & Services funds fits our benchmark very well—partly because neither focuses solely on healthcare facilities and managed healthcare, the
“Neither fund perfectly captures the broad space” two sectors that dominate the industry.
Compared to the benchmark, the two funds are far more sector diverse. IHF is the broader of the 2 funds, spreading out its exposure beyond facilities and managed healthcare, reaching into sectors like life & health insurance and drug retailers. XHS focuses heavily on facilities, leaving less weighting to other sectors.
IHF, like our benchmark, uses market-cap weighting while XHS equally weights its portfolio, which diminishes the weights of the biggest companies. IHF, with major holdings in both Express Scripts and UnitedHealth Group, comes closer to mimicking our benchmark. XHS's equal-weighting scheme significantly reduces the fund's weighted average market cap to a small fraction of the benchmark's. (Insight updated 02/27/17)