Better Biotech ETF: First Trust's FBT vs. Invesco's PBE
Both biotech ETFs hold about 30 healthcare names, but their index methods and fees differ enough to shape results for investors weighing sector exposure.
First Trust NYSE Arca Biotechnology Index Fund (FBT) and Invesco Biotechnology & Genome ETF (PBE) are two prominent ETFs in the biotechnology sector. FBT offers a lower expense ratio of 0.55% compared to PBE's 0.59%, making it a more cost-effective choice. FBT also boasts a larger assets under management (AUM) than PBE, which can lead to greater liquidity and higher trading volume - currently at 70,500 compared to PBE's 18,400.
FBT is tied to the NYSE Arca Biotechnology Index, tracking companies in medical research and diagnostic testing with a 30-stock portfolio. Key holdings include Genmab A/S, Regeneron Pharmaceuticals, and ADMA Biologics. In contrast, PBE utilizes a multi-factor quantitative index, evaluating companies based on criteria like price momentum, earnings growth, and management decisions.
Its portfolio of 31 stocks focuses on healthcare sector leaders like Gilead Sciences, Biogen, and Royalty Pharma. While FBT has shown stronger returns over one-year and five-year periods, PBE pays dividends and employs a merit-based selection process. Ultimately, investors must weigh cost, performance, dividend yield, and index-tracking methodology when choosing between these two biotech ETFs.
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