X Shares Advisors recently launched a line of exchange traded funds(ETFs) called HealthShares. These unique funds are narrow subsectors within the healthcare sector. The structural difference in these funds can offer better returns but increase volatility as well. Each fund has only 22-25 holdings of equal weight and there are no companies weighted over $15 billion. Roger Nusbaum of TheStreet.com states his concern is if some of the stocks are held at the expense of some of the other stocks in the fund. Then there could be an offset in the fund that would mute its performance.
The almost micro-cap nature of the funds and the expense ratio of 0.75% can be a turn-off, but since the fund holds a lot of low-priced stocks that are expensive to trade, the isolation of the subsectors could be worth the extra basis points.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.