The State Street SPDR S&P Health Care Services ETF (XHS) made its debut on 09/28/2011, and is a smart beta exchange traded fund that provides broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of 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
XHS is managed by State Street Investment Management, and this fund has amassed over $208.8 million, which makes it one of the average sized ETFs in the Health Care ETFs. XHS, before fees and expenses, seeks to match the performance of the S&P Health Care Services Select Industry Index.
The S&P Health Care Services Select Industry Index represents the health care sub-industry portion of the S&P Total Stock Market Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Global Select Market. The Health Care Index is a modified equal weight index.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.20%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Healthcare sector - about 100% of the portfolio.
When you look at individual holdings, Humana Inc (HUM) accounts for about 3.44% of the fund's total assets, followed by Centene Corp (CNC) and Clover Health Investments Co (CLOV).
XHS's top 10 holdings account for about 26.64% of its total assets under management.
Performance and Risk
The ETF has added about 26.74% so far this year and is up about 45.5% in the last one year (as of 07/17/2026). In the past 52-week period, it has traded between $88.00 and $137.73
XHS has a beta of 0.93 and standard deviation of 17.73% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 59 holdings, it effectively diversifies company-specific risk .
Alternatives
State Street SPDR S&P Health Care Services 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.
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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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State Street SPDR S&P Health Care Services ETF (XHS): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).