This has been, quite simply a very, very good year in which to be long health care exchange traded funds.
The Health Care Select Sector SPDR (NYSEArca: XLV) is battling with its discretionary rival to be the best of the nine SPDR ETFs for 2013 and XLV spent some time as the third-largest sector SPDR by assets. [XLV Moves Into Third Spot Among SPDRs]
So strong have health care ETFs been that three rank among the ten best non-leveraged ETFs on the year. All three are biotechnology funds and each has a shot of wearing the crown as 2013’s top health care ETF, though the Market Vectors Biotech ETF (NYSEArca: BBH), up 63.2%, and the iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), up 63.1%, have the inside track over the PowerShares Dynamic Biotechnology & Genome Portfolio (NYSEArca: PBE) and its 2013 gain of 60.8%. [ETFs for Upstart Health Care Companies]
The success enjoyed by BBH and IBB this year is heavily tied to biotech’s “Big Four,” a quartet comprised of Amgen (NasdaqGM: AMGN), Biogen (NasdaqGM: BIIB), Celegene (NasdaqGM: CELG) and Gilead (NasdaqGM: GILD). Those stocks combine for 34.2% of IBB’s weight and roughly 43% of BBH’s weight.
The $4.3 billion IBB, the largest biotech ETF by assets, is home to 119 stocks compared to 26 in BBH. However, the Market Vectors offering has a lower annual expense ratio at 0.35% compared to 0.48% on IBB. BBH’s weighted average market value is just over $43 billion compared to an average market cap of $30.2 billion in IBB, according to issuer data.
BBH and IBB share another trait in common. Both were also among 2012’s top-10 sector ETFs and are the only two funds from last year’s list to make a return appearance in 2013. [Some of 2012’s Best Sector ETFs Kept Soaring in 2013]