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A Must-Read Structural Overview of PBE

Ivan Kading

A Must-Read Structural Overview of PBE

Biotech sector ETF

The PowerShares Dynamic Biotechnology & Genome Portfolio ETF (PBE) is a smart beta fund that seeks to track the performance of the Dynamic Biotech & Genome Intellidex Index. The ETF is a sectoral fund that focuses more on the biotechnology sector than the healthcare sector as a whole. The underlying index selects stocks that are principally engaged in the research, development, manufacturing, marketing, and distribution of various biotechnological products, services, and processes.

The graph above compares PBE’s market return with that of PowerShares’ other healthcare-related funds, the PowerShares Dynamic Pharmaceuticals ETF (PJP) and the PowerShares DWA Healthcare Momentum ETF (PTH).

PBE in comparison with other healthcare ETFs

Like PBE, PJP and PTH are owned by PowerShares and have similar stock-selection methodology. While PTH has a mixture of both biotechnology and pharmaceutical stocks in its portfolio, PJP’s portfolio is more heavily weighted towards pharmaceutical stocks than biotechnology. The above graph shows that all three healthcare ETFs have performed similarly in the market, though PBE’s performance between October 20 and November 20, 2015, has been outstanding, with a return of 5.7%, which is higher than many smart beta ETFs’ returns. A detailed study of PBE’s performance and portfolio structure will be presented in the following parts of this series.

High risk

PBE’s top holdings include biotechnology stocks Regeneron Pharmaceuticals (REGN), Gilead Sciences (GILD), Incyte (INCY), BioMarin Pharmaceutical (BMRN), and Myriad Genetics (MYGN). Biotechnology stocks are highly risky as not many companies survive in the market. In the next part of this series, we’ll study PBE’s biotechnology stocks’ performance in respect to the broader market.

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