Healthcare exchange-traded funds (ETFs) invest in a basket of stocks of companies that provide medical services, develop medical equipment or drugs, offer medical insurance, or facilitate the provision of healthcare to patients. Some notable companies in the healthcare sector include UnitedHealth Group Inc. (UNH), CVS Health Corp. (CVS), and Cigna Corp. (CI). Because the majority of healthcare services and products are necessities as opposed to luxuries, the healthcare industry is considered non-cyclical, which makes healthcare ETFs a strong defensive position in any portfolio.
The healthcare ETF universe is comprised of about 27 distinct ETFs, excluding leveraged and inverse ETFs as well as funds with less than $50 million in assets under management (AUM). The best-performing healthcare ETF for Q3 2020, based on performance over the past year, is the ARK Genomic Revolution Multi-Sector ETF (ARKG). We examine the top healthcare ETFs below. All numbers in this story are as of May 10, 2020.
- Performance over 1-Year: 44.2%
- Expense Ratio: 0.75%
- Annual Dividend Yield: 5.02%
- 3-Month Average Daily Volume: 319,098
- Assets Under Management: $856.3 million
- Inception Date: October 31, 2014
- Issuing Company: ARK Investment Management
An actively-managed multi-cap fund, ARKG has built a track record of consistently outperforming the market by identifying companies most likely to profit from the latest advances in areas such stem cell advances, gene editing, genetic therapy, and molecular diagnostics. The ETF’s holdings are dominated by large-cap stocks. As of May 10, 2020, the top holdings for this fund include Invitae Corp. (NVTA), the medical genetics company; Arcturus Therapeutics Holdings, Inc. (ARCT), the messenger RNA medicines firm; and Illumina, Inc. (ILMN), the genetic sequencing company.
- Performance over 1-Year: 34.2%
- Expense Ratio: 0.65%
- Annual Dividend Yield: 0.21%
- 3-Month Average Daily Volume: 69,056
- Assets Under Management: $60.5 million
- Inception Date: February 01, 2018
- Issuing Company: KraneShares
KURE is a large-cap ETF that focuses on stocks in China’s healthcare sector. It tracks the MSCI China All Shares Health Care 10/40 Index, a free-float-adjusted index that’s market-cap weighted. The fund follows a blended strategy, investing in both value and growth stocks. As of February 9, 2020, the ETF’s top three holdings include Jiangsu Hengrui Medicine Co. Ltd. (600276), the pharmaceutical company; Wuxi Biologics Cayman Inc. (2269), the pharmaceutical firm; and Shenzhen Mindray Bio-Medical Electronics Co. Ltd. (300760), the maker of medical equipment.
- Performance over 1-Year: 33.0%
- Expense Ratio: 0.60%
- Annual Dividend Yield: N/A
- 3-Month Average Daily Volume: 42,391
- Assets Under Management: $311.4 million
- Inception Date: October 12, 2006
- Issuing Company: Invesco
PTH tracks the Dynamic Healthcare Sector Intellidex Index, which also seeks alpha performance by using quant-based filters to choose individual stocks. PTH tends to appeal to investors looking for a short-term tactical portfolio adjustment or as part of a sector rotation approach. Though most holdings are relatively equally weighted, the current top holdings for this fund include Axsome Therapeutics Inc. (AXSM), the biopharmaceutical company; West Pharmaceutical Services Inc. (WST), the pharmaceutical packaging and delivery service maker; and Masimo Corp. (MASI), the medical monitoring company.