Best Biotech ETFs by Performance

Biotech ETFs have gained a lot of attention from investors in recent years, and for good reason. Biotechnology is an industry that focuses on developing and researching new treatments and cures for diseases. Biotechnology is a rapidly growing field that has potential to continue to expand in the coming years. 

In this article, we share the best biotech ETFs, as measured by one-year performance through March 1, 2023, as well as the potential benefits of investing in biotech. 

Why Invest in Biotech ETFs? 

Investing in biotech ETFs is a way to gain exposure to this dynamic industry with less of the risks associated with investing in individual stocks. Biotech ETFs can provide investors with a diversified portfolio of biotech companies, which spreads out the risk and provides a more stable investment opportunity. 

Reasons investors may choose to invest in biotech ETFs include: 

• Potential for high returns 
• Diversification 
• Innovation and growth 
• Aging population 
• Accessible and cost effective 

Potential for High Returns 

Biotech ETFs have the potential for high returns, especially as new treatments and drugs are developed and approved by regulatory agencies. Biotech companies that produce these treatments can experience significant growth, leading to potentially high returns for investors. 

Diversification 

Biotech ETFs invest in a wide range of companies that are involved in biotechnology. This diversification helps to reduce risk and can provide a more stable investment opportunity compared to investing in individual stocks. By investing in a biotech ETF, an investor can spread risk across many different companies, which reduces the impact of any one company’s performance on the overall investment portfolio. 

Innovation and Growth 

Biotech companies are known for their innovation and growth potential. As new technologies are developed and new treatments are discovered, biotech companies have the potential to become the leaders in their field. Investing in biotech ETFs can provide exposure to these innovative companies and their growth potential. 

Aging Population 

Biotech companies often focus on developing drugs and treatments for diseases that affect a large portion of the population. As the population continues to grow and age, the demand for these treatments is likely to increase. This can help biotech companies and their investors to weather inflationary pressures. 

Accessible and Cost Effective 

Investing in biotech ETFs is accessible and cost effective for almost any type of investor. ETFs are traded like stocks, which means investors can buy and sell them throughout the day. Additionally, the management fees for ETFs are typically lower than mutual funds, making them a more cost-effective investment option. 

Investors should note that along with the potential for high returns and long-term growth, biotech ETFs can produce wide swings in price, making them higher-risk investments compared to broader market indices, such as the S&P 500. 

Best Biotech ETFs by Performance 

To arrive at our list of best biotech ETFs by performance, we started with the entire universe of health care ETFs. We then selected our finalists that concentrate holdings on biotech stocks and ranked them by one-year returns. We did not include leveraged ETFs. For deeper reference, we include each fund’s AUM and expense ratio.

The five best biotech ETFs, as measured by one-year returns, are: 

Virtus LifeSci Biotech Products ETF 

The Virtus LifeSci Biotech Products ETF (BBP) tracks an index of U.S.-listed biotechnology companies considered to be in the “product stage” by the index provider. To be included in the portfolio, stocks must earn most of their revenue from the research and development and/or marketing and sale of novel drugs or other therapeutics used in the treatment of human diseases.   

• One-year return: 17.45% 
• Assets under management: $17.31M 
• Expense ratio: 0.79% 
• As of date: March 1, 2023 

Invesco Dynamic Biotechnology & Genome ETF 

The Invesco Dynamic Biotechnology & Genome ETF (PBE) tracks a tiered equal-weighted index of companies principally engaged in biotechnology and genetic engineering. Thus, although the PBE portfolio includes companies that benefit significantly from advances in biotech and genetic engineering, the fund is not a pure-play biotech ETF.  

• One-year return: 6.89% 
• Assets under management: $255.85M 
• Expense ratio: 0.59% 
• As of date: March 1, 2023 

First Trust NYSE Arca Biotechnology ETF 

The First Trust NYSE Arca Biotechnology ETF (FBT) tracks an equal-weighted index of U.S. biotechnology stocks. FBT’s equal weighting of about 30 stocks produces a relatively concentrated basket. Without a specific sector classification scheme, the fund’s broad exposure could include access to pharmaceuticals and medical technology in addition to traditional biotech.  

• One-year return: 6.20% 
• Assets under management: $1.47B 
• Expense ratio: 0.55% 
• As of date: March 1, 2023 

iShares Biotechnology ETF 

The iShares Biotechnology ETF (IBB) tracks the performance of a modified market-cap-weighted index of U.S. biotechnology companies listed on U.S. exchanges. This includes companies that are engaged in the production of tools or systems that enable biotechnology processes, as well as companies engaged in the research and development of therapeutic treatments. 

• One-year return: 2.15% 
• Assets under management: $8.08B 
• Expense ratio: 0.44% 
• As of date: March 1, 2023 

VanEck Biotech ETF 

The VanEck Biotech ETF (BBH) tracks a market-cap-weighted index of the 25 largest biotech firms globally. The underlying index has a flexible definition of biotech, encompassing companies engaged primarily in research (including research contractors) and development as well as production, marketing and sales of drugs based on genetic analysis and diagnostic equipment, excluding pharmacies. 

• One-year return: 1.63% 
• Assets under management: $496.36M 
• Expense ratio: 0.35% 
• As of date: March 1, 2023 

Bottom Line 

Investing in biotech ETFs can provide investors with exposure to the dynamic and rapidly growing biotechnology industry, while also reducing the risks associated with investing in individual biotech stocks. However, investors should keep in mind that biotech investments can produce elevated volatility compared to the broader stock market indices.