The tech ETF space offers plenty of important questions for investors. How much run, for example, does AI have left for portfolios? Even if AI benefits tech writ large, which tech firms will benefit and which will be disrupted? Could AI-driven valuations actually signal a bubble? Amid all that uncertainty considering tech ETFs, one potential solution could be a biotech ETF. SBIO, for example, stands out as a strong candidate therein.
See more: In Rate Curve Uncertainty, Active Core Bond ETF SMTH Can Appeal
The ALPS Medical Breakthroughs ETF (SBIO), charges a 50 basis point fee to track the S-Network Medical Breakthroughs Index. That index offers a market-cap-weighted approach to U.S. biotech firms with one or more drugs in Phase II or Phase III FDA clinical trials. It limits itself to firms with at least $200 million in market cap. Its index providers screen for constituent firms that have enough cash on hand to last two years.
Together, that has helped SBIO return 22.8% over the last three months. The strategy has returned 22.8% over the last three months, according to ETF Database. That has outperformed its ETF Database Category and FactSet Segment averages in that time. Specifically, it has beaten those metrics at 6.9% and 12.7%, respectively.
So, what about the biotech ETF makes it a candidate for that tech ETF role? The fund’s exposure to health tech gives it exposure to a traditionally more defensive sector. That can somewhat mitigate the volatility in broader tech. What’s more, the M&A activity so key to biotech, too, plays an important role, and could happen even as broader tech struggles. The fund also retains exposure to the key trend in tech — AI — with the key technology driving new innovations.
Overall, the strategy could make for an intriguing way to add a tech ETF to one’s portfolio. The strategy could either serve as an intriguing addition to a tech suite, or even swap into a sector space. Looking ahead, it could play a helpful role to end the year.
For more news, information, and analysis, visit the ETF Building Blocks Content Hub.
VettaFi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for SBIO, for which it receives an index licensing fee. However, SBIO is not issued, sponsored, endorsed, or sold by VettaFi. VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of SBIO.
