A Structural Analysis of PJP, a Smart Beta Healthcare Fund
The PowerShares Dynamic Pharmaceuticals ETF (PJP) is a smart beta fund that seeks to track the Dynamic Pharmaceutical Intellidex Index. The index provider selects the majority of its stocks from the pharmaceuticals sub-sector. Pharmaceutical companies are defined by PJP’s prospectus are companies that are engaged principally in the research, development, manufacture, sale, or distribution of pharmaceuticals and drugs of all types.
PJP versus other healthcare funds
The above graph compares the market performance of PJP with Invesco’s other healthcare-related smart beta funds including the PowerShares DWA Healthcare Momentum Portfolio (PTH) and PowerShares Dynamic Biotechnology & Genome Portfolio (PBE). Similar to PJP, PBE selects the majority of its stocks from the biotechnology sector, whereas PTH includes stocks from both the pharmaceuticals and biotechnology sector.
As we can see from the above graph, all three funds performed similarly over the past two quarters in 2015, as of the beginning of November. Among the three, PJP was most affected due to poor market performance and fell the most over the selected period.
Pharmaceutical sector going strong
The top holdings of PTH include pharmaceuticals stocks such as Bristol-MyersSquibb Company (BMY), Pfizer (PFE), Gilead Sciences (GILD), Allergan (AGN), and Merck & Company (MRK). Pharmaceuticals is one of the top performing subsectors in the market thanks to the strong market performances of companies like Pfizer and Allergan.
In the next part of this series, we’ll look more closely at the PowerShares Dynamic Pharmaceuticals ETF’s performance in 2015.
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