Top Biotech ETF Options: Comparing the Largest Biotech ETFs by Assets

The biotechnology sector presents significant growth opportunities for investors, but the inherent volatility makes it challenging to pick winning individual stocks. Many investors are turning to biotech ETF solutions as a more balanced approach, allowing them to diversify their exposure across multiple companies and reduce the impact of any single underperformer. Understanding the landscape of available biotech ETF options can help investors make more informed decisions aligned with their risk tolerance and investment objectives.

Why Diversify Through Biotech ETF Vehicles?

Biotech ETFs offer several advantages over direct stock picking in the life sciences sector. First, they reduce the concentration risk that comes with betting on a single therapy or technology platform. Second, these funds provide access to a broader range of companies—from well-established pharmaceutical firms to emerging biotech innovators. Third, the professional management and diverse holdings help smooth out the volatile swings that characterize biotech investing. By spreading investments across dozens or hundreds of holdings, investors can participate in sector growth while mitigating losses from individual failures.

Data compiled from ETFdb.com as of November 2024 identified five leading biotech ETF vehicles by total assets under management. These funds represent different investment philosophies and risk profiles, each appealing to distinct investor preferences.

Large-Cap Diversification: The Dominant Biotech ETF Strategies

SPDR S&P Biotech ETF (XBI) stands as one of the largest biotech ETF offerings, with approximately US$7.82 billion in assets. Launched in February 2006, this fund maintains a balanced portfolio of 144 holdings, emphasizing smaller and micro-cap biotechnology and pharmaceutical companies. The equal-weight approach means no single position dominates the fund. Top holdings include Incyte (3.11%), United Therapeutics (2.86%), and Gilead Sciences (2.7%).

iShares NASDAQ Biotechnology ETF (IBB) follows closely with US$7.33 billion in assets, tracking 211 NASDAQ-listed companies across biotechnology, pharmaceuticals, and life science services. Launched in 2001, this diversified biotech ETF has become one of the sector’s most established vehicles. Its heaviest concentrations are Gilead Sciences (9.35%), Vertex Pharmaceuticals (8.02%), and Amgen (7.76%), reflecting a more concentrated approach than XBI.

These two dominant biotech ETF products collectively represent nearly US$15 billion in assets and attract investors seeking broad sector exposure through established, liquid vehicles.

Targeted Strategy Biotech ETFs: Genomics and Innovation Focus

For investors seeking more specialized exposure within the biotech ETF universe, ARK Genomic Revolution Multi-Sector ETF (ARKG) offers a distinctly different approach. With US$1.31 billion in assets and only 38 holdings, this fund concentrates on companies developing CRISPR technology, bioinformatics, molecular diagnostics, and stem cell therapies. Established in October 2014, ARKG represents a thematic biotech ETF strategy targeting genomic innovation. Top positions include Twist Bioscience (8.57%), CRISPR Therapeutics (7.05%), and Recursion Pharmaceuticals (6.91%).

This specialized biotech ETF approach appeals to growth-oriented investors willing to accept higher concentration risk in exchange for targeted exposure to next-generation biotechnologies.

Equal-Weight Construction: The Narrowly-Focused Biotech ETF Model

First Trust NYSE Arca Biotechnology Index (FBT) takes a different structural approach with just US$1.21 billion in assets and 31 equally-weighted holdings. Launched in June 2006, this biotech ETF focuses on companies engaged in recombinant DNA technology, molecular biology, genetic engineering, and genomics. The equal-weight structure means larger weightings than typical market-cap biotech ETFs for smaller constituents. Key holdings include Natera (4.78%), Exelixis (4.31%), Bruker (4.09%), Intra-Cellular Therapies (3.83%), Incyte (3.8%), and Halozyme Therapeutics (3.89%).

This equal-weight biotech ETF construction method prevents larger companies from overwhelming the portfolio, creating different risk-return characteristics compared to market-cap-weighted alternatives.

Leveraged Strategy: The 3x Bull Biotech ETF

Direxion Daily S&P Biotech Bull 3x Shares ETF (LABU) represents the aggressive end of the biotech ETF spectrum, with approximately US$956.65 million in assets. Created in May 2015, this leveraged biotech ETF seeks daily results of 300% of the S&P Biotechnology Select Industry Index—meaning it aims to amplify gains (and losses) threefold. With 142 holdings, LABU maintains top positions in Incyte (2.96%), United Therapeutics (2.71%), and Gilead Sciences (2.7%). This leveraged biotech ETF strategy suits experienced traders with high risk tolerance seeking tactical exposure rather than long-term core holdings.

Selecting the Right Biotech ETF for Your Portfolio

Investors evaluating these five biotech ETF options should consider several decision criteria. Those seeking broad sector exposure at lower cost typically gravitate toward XBI or IBB, the most established and liquid biotech ETF vehicles. Investors betting on genomic innovation breakthroughs might favor ARKG’s concentrated biotech ETF approach. Those preferring equal-weight construction to avoid mega-cap concentration can explore FBT. Experienced traders seeking tactical amplification can consider LABU’s leveraged biotech ETF structure, though leverage introduces substantial daily volatility.

The choice between biotech ETF vehicles ultimately depends on individual investment horizons, risk tolerance, and conviction about future biotechnology trends. Each fund mentioned here provides legitimate exposure to the life sciences sector, with different fee structures, tracking strategies, and risk profiles. Data for this analysis was sourced from November 2024 ETF databases and remains current as of that publication date.

This analysis reviews biotech ETF landscape information compiled from publicly available fund data. Individual investors should conduct their own research and consult financial advisors before making investment decisions.