A smart beta exchange traded fund, the First Trust NYSE Arca Biotechnology ETF (FBT) debuted on 06/19/2006, and offers broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
FBT is managed by First Trust Advisors, and this fund has amassed over $2.87 billion, which makes it one of the larger ETFs in the Health Care ETFs. FBT seeks to match the performance of the NYSE Arca Biotechnology Index before fees and expenses.
The NYSE Arca Biotechnology Index is an equal dollar weighted index designed to measure the performance of a cross section of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for FBT are 0.55%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.00%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
FBT's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
Looking at individual holdings, Moderna, Inc. (MRNA) accounts for about 5.05% of total assets, followed by Gilead Sciences, Inc. (GILD) and United Therapeutics Corporation (UTHR).
The top 10 holdings account for about 39.4% of total assets under management.
Performance and Risk
The ETF has added about 23.96% and was up about 53.2% so far this year and in the past one year (as of 07/10/2026), respectively. FBT has traded between $159.46 and $256.19 during this last 52-week period.
The fund has a beta of 0.65 and standard deviation of 20.25% for the trailing three-year period, which makes FBT a high risk choice in this particular space. With about 31 holdings, it has more concentrated exposure than peers .
Alternatives
First Trust NYSE Arca Biotechnology ETF is a reasonable option for investors seeking to outperform the Health Care ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
iShares Biotechnology ETF (IBB) tracks Nasdaq Biotechnology Index and the State Street SPDR S&P Biotech ETF (XBI) tracks S&P Biotechnology Select Industry Index. iShares Biotechnology ETF has $9.59 billion in assets, State Street SPDR S&P Biotech ETF has $11.1 billion. IBB has an expense ratio of 0.44% and XBI changes 0.35%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Health Care ETFs
Bottom Line
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First Trust NYSE Arca Biotechnology ETF (FBT): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).