With the year drawing to a closer, investors may be on the lookout for a strategy or idea that has some momentum. In a notable turnaround from earlier this year, biotech looks to be one such area to consider.
Regulatory approvals for new gene treatment medicines as well as a brighter outlook for interest rates could be responsible. As such, investors may want to take a look at a biotech ETF like SBIO, which has seen its returns spike significantly just this past month.
The ALPS Medical Breakthroughs ETF (SBIO) has seen its returns reach 31.3% for the last month, per VettaFi data. The last month’s returns have likely also contributed to a spike for its three-month returns, too, reaching 21.8%. SBIO is up year to date by more than 10%, with the biotech ETF outperforming its ETF Database Category average, with the category only returning 2.9% YTD.
That rise has also helped lift the ETF’s AUM back above $100 million. On top of some strong tech performance, it’s clearly on a hot streak. So what are its prospects moving forward?
The 2024 Biotech ETF Outlook
Biotech firms often take a big hit from interest rate rises given how much debt biotech companies take at the start. Biotech companies often start small before ramping up after a patent approval or research breakthrough, so high interest rates pose a problem. Should the Fed actually cut rates next year as markets seem to believe it will, biotech could respond very well. That anticipation may well explain why the space has already done well since the Fed has paused.
As markets anticipate further M&A in the space that could also boost investing, a biotech ETF like SBIO could appeal. The strategy tracks the S-Network Medical Breakthroughs Index for a 50 basis point (bps) fee, investing in biotech firms with drugs in Phase II and Phase III FDA trials among firms meeting market cap and sustainability standards. Should 2024 offer an overall healthy outlook, SBIO could be an ETF to watch.
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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, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of SBIO.