An ETF to Capture Promising Biotech Innovators | ETF Trends

Innovative biotechnology companies are coming out with novel treatments in the healthcare industry. Investors can also capture the ongoing innovations in the biotech sector through a targeted exchange traded fund that tracks the benchmark Nasdaq Biotechnology Index.

Specifically, the Invesco Nasdaq Biotechnology ETF (IBBQ) tracks the Nasdaq Biotechnology Index (NBI), which is designed to measure the performance of securities listed on the Nasdaq Stock Market that are classified as either biotechnology or pharmaceutical companies.

“The trend towards higher IPO volumes established during the Covid-19 pandemic may very well continue into 2022. The Nasdaq Biotechnology Index offers investors a transparent, effective benchmark for tracking new entrants into the public markets while maintaining appropriate weightings among the more volatile, younger small-cap segment of the industry and its more stable, older large-cap members,” according to Nasdaq.

The Nasdaq Biotechnology Index’s constituent basket has expanded to 373 companies as of December 20, 2021, with a record total of 129 new components just qualifying for index inclusion after 100 such additions back in December 2020.

The expansion in the biotech market has been backed by tremendous growth within the small-cap biotech space over the past two years.

“The biotech industry has clearly benefitted from robust trends in the IPO market across multiple sectors in the U.S. and globally. As the long-running home to biotech, Nasdaq has won more than 98% of these listings over the past three years and has a 97% win rate since 2013,” according to Nasdaq.

“Overall, the NBI Index has evolved into a younger, more diversified portfolio of companies while still preserving the importance of the largest biotech players.”

While the Nasdaq Biotech Index has included many new biotech names with greater exposure to small- and mid-cap names, the benchmark still maintains its hefty tilt toward more established names. The top 10 largest components still represent nearly half of the overall index weight after dipping from 50.4% pre-reconstitution to 46.8% immediately after.

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