“In fact, IXJ only has a standard deviation of 8.86%. The underlying portfolio’s average price-to-earnings (P/E) has risen since the passing of Obamacare, and it reached 26.25 by mid-2015. The fund’s alpha rating was a solid 5.33 in 2005, but that number surged to 12.44 by 2015. Modern portfolio theory (MPT) suggests that, in a vacuum, management must have went from very good to incredible over that time period. The more likely answer is the firms were able to use regulatory change to lock in higher earnings,” according to Investopedia.
IXJ does lack a couple of prominent themes from the world of ETFs. First, although it is a global fund, it is not a currency hedged ETF. In IXJ’s case that is just fine because health care stocks are strong dollar beneficiaries and the U.S. is a massive percentage of IXJ’s weight. Second, because it does include exposure to other countries, IXJ’s biotechnology weight is low compared to U.S.-focused health care ETFs for the simple reason that most of the world’s marquee biotech companies are based here.
“All told, IXJ is a relatively low-risk, low-return ETF highly influenced by regulations on the health care industry. It can play as a defensive holding for investors whose primary portfolio is highly correlated with the U.S. equities market,” notes Investopedia.
