Investing News

Best Biotech ETFs for Q4 2021

Biotech companies use or modify biological processes in order to create new pharmaceuticals or therapies. The biotech sector is particularly closely followed right now as a number of biotech companies around the world have developed or are developing potential vaccines for COVID-19. Some of the most prominent biotech companies include Vertex Pharmaceuticals Inc. (VRTX) and Regeneron Pharmaceuticals Inc. (REGN).

Key Takeaways

  • The biotech sector underperformed the broader market over the past year.
  • The biotech ETFs with the best one-year trailing total return are ARKG, IDNA, and BBH.
  • The top holding of ARKG is Teladoc Health Inc., and the top holding of IDNA and BBH is Moderna Inc.

Investing in the biotech sector can be risky. The scientific and regulatory issues involved with gaining approval from the U.S. Food and Drug Administration (FDA) can be substantial, making it risky and difficult to predict what biotech stocks will outperform. One of the easiest ways to invest in the sector is through biotech exchange-traded funds (ETFs). These funds have holdings in a large array of biotech companies, offering investors a well-diversified portfolio in one easy-to-execute trade.

There are 10 biotech ETFs that trade in the U.S., excluding inverse and leveraged ETFs as well as funds with less than $50 million in assets under management (AUM). The biotech sector, as measured by the Nasdaq Biotechnology Index, has underperformed the broader market with a total return of 28.0% over the past 12 months compared to the S&P 500’s total return of 34.0%, as of Aug. 10, 2021. The best-performing biotech ETF, based on performance over the past year, is the ARK Genomic Revolution ETF (ARKG). We examine the top three best biotech ETFs below. All numbers are as of Aug. 10, 2021.

  • Performance over One-Year: 46.2%
  • Expense Ratio: 0.75%
  • Annual Dividend Yield: 0.91%
  • Three-Month Average Daily Volume: 2,939,797
  • Assets Under Management: $8.9 billion
  • Inception Date: Oct. 31, 2014
  • Issuer: ARK

ARKG is an actively managed ETF focused on companies expected to benefit from technologies and scientific developments in genomics that could extend and enhance the quality of human and other life. The fund provides exposure to companies engaged in gene editing, therapeutics, stem cells, and bioinformatics and holds approximately 60 growth stocks of various market capitalizations.

ARKG’s top three holdings include Teladoc Health Inc. (TDOC), a provider of telehealthcare services; Pacific Biosciences of California Inc. (PACB), a maker of systems for gene sequencing; and Fate Therapeutics Inc. (FATE), a biopharmaceutical company developing immunotherapies for cancer.

  • Performance over One-Year: 39.5%
  • Expense Ratio: 0.47%
  • Annual Dividend Yield: 0.16%
  • Three-Month Average Daily Volume: 62,820
  • Assets Under Management: $359.2 million
  • Inception Date: June 11, 2019
  • Issuer: BlackRock Financial Management

IDNA is a multi-cap blended fund that tracks the NYSE FactSet Global Genomics and Immuno Biopharma Index, which is made up of companies that may benefit from long-term growth and innovation in genomics, immunology, and bioengineering. The fund invests in companies from both developed and emerging markets, although the large majority of its holdings are domiciled in the U.S. or Germany.

IDNA’s top holdings include Moderna Inc. (MRNA), a pharmaceutical and biotechnology company specialized in vaccine technologies based on messenger RNA; Intellia Therapeutics Inc. (NTLA), a biotechnology company focused on CRISPR gene-editing technology; and sponsored American depositary receipts (ADRs) of BioNTech SE (BNTX), a German biotechnology company that manufactures immunotherapies.

  • Performance over One-Year: 35.2%
  • Expense Ratio: 0.35%
  • Annual Dividend Yield: 0.28%
  • Three-Month Average Daily Volume: 15,785
  • Assets Under Management: $629.3 million
  • Inception Date: Dec. 20, 2011
  • Issuer: VanEck

BBH tracks the MVIS U.S. Listed Biotech 25 Index, an index of companies involved in the development and production, sales, and marketing of therapies based on genetic analysis and diagnostic equipment. The fund is highly concentrated in a few names, with the top 10 of its 24 holdings accounting for more than 60% of all invested assets.

BBH’s top holdings include Moderna Inc.; Amgen Inc. (AMGN), a biopharmaceutical company focused on treating serious illnesses and hard to cure diseases; and sponsored ADRs of BioNTech SE.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.