We spoke about the Biotech sector in the context of a sell-off that began in late March this year instead of April like last year, and the weakness there continues today with the largest product in the space, IBB (iShares Biotech, Expense Ratio 0.48%) flirting with its 50 day moving average again for the second time inside of a week.
An ETF issuer that is rather new to the marketplace fits in nicely in this discussion given their focus in the Biotech Equity space, and this company is known as LifeSci Index Partners. The New York based firm currently has
two ETFs listed under the “BioShares” ETF brand, BBC (BioShares Biotechnology Clinical Trials, Expense Ratio 0.85%, $20.8 million in AUM) and BBP (BioShares Biotechnology Products, Expense Ratio 0.85%, $9.3 million in AUM) which debuted just last December of 2014.
The asset levels, primarily in the case of BBC is commendable in a relatively short amount of time, which is also likely a testament to the growing and seemingly sustainable popularity in Biotech Equity specific products. BBC is structured as an equal-weighted index approach that invests in Biotechnology company stocks that according to fund literature, “with a primary product offering that is in a Phase1, Phase 2, or Phase 3 clinical trial stage of development.”
We are not aware of any other index/ETF approach out there like this currently, thus the fund has nicely carved out its own niche in a small amount of time, and at a juncture where interest in Biotech stocks is extremely high
primarily because of the strong bull equity run fueled by merger and acquisition induced premiums at times.
The title of the fund itself will likely attract the interest of many, specifically fund managers that currently invest in individual Biotech stocks that may be flying under the radar but have potentially positive things in store for the future given the results of pending Phase trials.
Anyone whom is familiar with Small- Cap Biotech companies also likely realizes the potential of high loss in some cases along with extraordinarily high volatility from name to name, based on the success or failure of their products during clinical trials.
This said, we emphasize that BBC employs an equal-weighted index methodology which is likely in response to not “betting the farm” on the wrong stock or stocks within the Biotech space. BBC trading
volume has increased significantly since the middle of March, bringing its ADV up to about 30,600 shares traded daily, and the most recently reported top holdings are composed as follows: ZIOP (3.36%), ASPX (3.29%), NBIX (2.25%), CEMP (2.14%), and ESPR (2.12%), with none of these stocks really being household names.
BioShares Biotechnology Clinical Trials Fund
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