Healthcare
Published by Radif Partners · Updated
Pharma, Biotech, Medical Devices, healthcare innovation and an aging world
This page compares 11 funds in the Healthcare category, with ongoing charges from 0.09% to 0.75% and a median of 0.40%. The gap between the cheapest and the dearest is worth roughly €660 over ten years on €10,000 invested: for a comparable index, that is the most reliable difference between two funds, because it rests on no assumption about markets. 5 of the 11 funds are accumulating and 11 replicate their index by holding its securities, the others using a swap. The largest fund in the list is XLV, which matters less for returns than for the risk of closure: a fund that stays small usually ends up merged. Past performance is not used to rank this list: over the horizons published it says more about the index being tracked than about how the fund is run.
11
0.34%
+27.2%
0.09%
+46.5%
Health Care Select Sector SPDR Fund
Vanguard Health Care ETF
iShares Biotechnology ETF
iShares S&P 500 Health Care Sector UCITS ETF USD (Acc)
Xtrackers MSCI World Health Care UCITS ETF 1C
ARK Genomic Revolution ETF
iShares MSCI World Health Care Sector UCITS ETF USD (Dist)
iShares Healthcare Innovation UCITS ETF USD (Acc)
iShares Ageing Population UCITS ETF USD (Acc)
iShares STOXX Europe 600 Health Care UCITS ETF (DE)
Invesco Nasdaq Biotech UCITS ETF Acc
Three very different industries under one label
Healthcare gathers business models with almost nothing in common. Pharmaceutical companies live off patents that expire, which creates the patent cliff, an abrupt fall in a product's revenue once generics arrive. Medical device makers look more like industrials, with equipment replacement cycles and steadier margins. Biotechnology, finally, is a set of binary bets: a phase three trial readout doubles or halves the share price in one session. An index that mixes the three does not have the risk profile its name suggests.
Two external factors dominate the sector. The first is political: drug prices are set by public payers in Europe and negotiated in the United States since the health insurance reform, so a regulatory announcement moves the sector more than a quarterly result. The second is demographic and pushes the other way, with structurally rising demand. For a portfolio, healthcare long served as a defensive sector, less cyclical than average, but that property comes from established pharmaceutical companies rather than biotechnology, so the index composition decides whether the fund keeps it.
What the funds in this category show
Where the money actually sits
The category holds 11 funds and 91.2B in combined assets, and those assets are not spread evenly. Health Care Select Sector SPDR Fund (XLV), run by SPDR, holds 43.4B on its own, and the three largest, Health Care Select Sector SPDR Fund (XLV), Vanguard Health Care ETF (VHT) and iShares Biotechnology ETF (IBB), account for 83.8 % of the total. At the other end, Invesco Nasdaq Biotech UCITS ETF Acc (SBIO) manages only 498M. Size is no guarantee of quality, but it decides two very concrete things: the spread between buying and selling price you pay on every order, and the odds that the fund still exists in ten years.
The fee gap, in money
Ongoing charges run from 0.09 % for Health Care Select Sector SPDR Fund (XLV) to 0.75 % for ARK Genomic Revolution ETF (ARKG), a gap of 0.66 points, against a category average of 0.34 %. On £10,000 held for ten years that gap is roughly 660 in extra charges, before counting the return that money would itself have earned. It is the one variable in the comparison known in advance: past performance does not repeat, fees repeat every year.
Two funds in one category do not hold the same basket
The 11 funds listed track 9 different indices, among them Health Care Select Sector, MSCI US Investable Market Health Care 25/50, Nasdaq Biotechnology and S&P 500 Health Care Sector. The largest tracks Health Care Select Sector. That spread is why two funds filed under the same theme can differ by several points over a year: they hold different securities, weight them differently and rebalance on different dates. Each fund page names its index, and that is where a serious comparison starts.
Replication and domicile
All 11 funds in the category replicate their index physically: they hold the securities. What remains to check is whether the fund lends those securities, which the key information document states, and how much: lending income lowers the real cost, counterparty risk adds to market risk.
6 of the 11 funds are domiciled in IE, the rest in US and DE. Domicile sets the withholding tax the fund itself suffers on the dividends it receives, a cost absent from the stated fee but present in the return, and it also sets your own tax treatment depending on where you live.
Accumulate or take the income
5 funds accumulate dividends, 6 pay them out. The largest accumulating share class is iShares S&P 500 Health Care Sector UCITS ETF USD (Acc) (IUHC), the largest distributing one Health Care Select Sector SPDR Fund (XLV). The choice is not about yield, both versions of the same index return the same before tax, but about tax and discipline: the accumulating class reinvests with no cost and no decision, the distributing class pays income that is taxable in the year it arrives.
Age and critical size
The oldest fund in the category, Health Care Select Sector SPDR Fund (XLV), launched on 1998-12-16, giving 28 years of history, and the newest, iShares MSCI World Health Care Sector UCITS ETF USD (Dist) (WHCS), on 2019-11-13. A long record shows how the fund behaved in a fall, which no one-year number can. A fund launched two years ago has lived through a single market regime.
None of the 11 funds manages under 100 million, the smallest being Invesco Nasdaq Biotech UCITS ETF Acc (SBIO). The category is therefore clear of closure risk for want of size, the risk that forces a sale on the issuer's timetable rather than the holder's.
Frequently asked questions
What do healthcare ETFs invest in?
Healthcare ETFs invest in pharmaceutical companies, biotech firms, medical device makers, and healthcare service providers. The sector is considered defensive due to inelastic demand for medical products. Check the figure in the key information document of the exact share class your broker offers, since two classes of the same fund can differ on charges and on distribution policy.
Are healthcare ETFs good for defensive portfolios?
Yes, healthcare is traditionally a defensive sector that performs relatively well during economic downturns. People need medication and medical care regardless of the economic cycle. What matters more than the ranking is whether the underlying index suits your horizon and your tolerance for a fall of thirty per cent, which no score can decide for you.
What are the risks of healthcare ETFs?
Healthcare ETFs face regulatory risk (drug pricing reforms), patent expiration risk for pharma companies, and clinical trial failures for biotech holdings. Political rhetoric around drug prices can cause volatility. Past performance over these horizons says more about the index than about the fund, which is why the comparison here weighs cost, size and tracking quality instead.
Global healthcare vs U.S. healthcare ETFs?
U.S. healthcare ETFs are concentrated in the world's largest pharma and biotech companies. Global healthcare ETFs add European firms like Roche, Novartis, and AstraZeneca for broader diversification. Over a ten-year horizon the ongoing charge weighs more than any difference in past performance: 0.20% against 0.50% on €10,000 is about €300, compounded.