On the surface, it would appear that equity-based exchange traded funds are struggling to keep and attract assets this year.
Inflows to equity ETFs do not look poised to recapture last year’s magic. Even when backing out the $17.4 billion lost by the SPDR S&P 500 (NYSEArca: SPY), inflows to equity ETFs this year are a scant $1.1 billion, according to ConvergEx Group data published earlier this week. [ETF Underdogs Return to Prominence]
The asset accumulation struggle is not afflicting all equity ETFs. No pun intended, but health care ETFs are proving immune, news that is not surprising as the sector is the top performer among the S&P 500 sectors year-to-date. [Health Care ETFs Keep on Soaring]
“In 2014, 51 percent of money flowing into U.S. sector-focused ETFs, or $4.06 billion through Feb. 28, was for health-care funds,” report Drew Armstrong and Lu Wang for Bloomberg.
As has been frequently noted, ETFs such as the Health Care Select Sector SPDR (NYSEArca: XLV) and the Vanguard Health Care ETF (NYSE: VHT) are littered with pharmaceuticals and biotechnology shares, good places to be this year amid deal-making and new product launches and approvals in the biotech industry. XLV allocates nearly two-thirds of its combined weight to pharma and biotech stocks.
Inflows to health care ETFs in 2014 are spread across an array of funds. Traditional cap-weighted funds, intelligent index products, dedicated biotech ETFs an all-pharma funds have all thrived. XLV, the largest health care ETF, has raked in almost $846 million while primary rival VHT has brought in $508 million. The Fidelity MSCI Health Care Index ETF (NYSEArca: FHLC) is, to this point, the lone member of the 10 sector ETFs introduced by the mutual giant in October to cross the $100 million in assets mark.[Fidelity Sector ETFs off to Solid Starts]
Those are all cap-weighted products, but the First Trust Health Care AlphaDEX Fund (NYSEArca: FXH) and the First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT), two smart beta ETFs, have hauled in over $432 million combined. The PowerShares Dynamic Pharmaceuticals Portfolio (NYSEArca: PJP) and the PowerShares Dynamic Biotechnology & Genome Portfolio (NYSEArca: PBE) are two of that issuer’s seven best ETFs in terms of 2014 inflows, according to issuer data.
Although biotech ETFs have proven to be prolific asset gatherers, the group’s ascent has stoked talk of a biotech bubble due to valuations that are twice the industry’s already rich historical premium to the broader market. The iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB) and the SPDR S&P Biotech ETF (NYSEArca: XBI), which are up an average of almost 23% this year, have brought in a combined $924 million in 2014. [Health Care ETFs Face Lofty Valuations]
Led by XBI, all five of the major biotech ETFs have traded higher this year while IBB is the inflows leader. IBB, the largest biotech by assets, has ranked among the 10 best non-leveraged sector or industry ETFs for three consecutive years.
iShares Nasdaq Biotechnology ETF
