BlackRock adds neuroscience ETF to thematic lineup
iShares is buffing up its thematic ETF lineup, launching a new fund that invests in neuroscience and medtech companies.
The iShares Neuroscience and Healthcare ETF (IBRN) tracks the NYSE FactSet Global Neuro Biopharma and MedTech Index.
The index is made of global companies that are involved in the research, development or manufacturing of neurology biopharmaceuticals or neurological devices, under FactSet’s RBICS.
For a company to be included in either sub-industry, the subindustry must represent at least 50% of the company’s annual revenues or, for pre-revenue companies, the company’s primary business as indicated by its product pipeline, according to FactSet.
Stocks are market weighted but capped at 4%.
IBRN charges 0.47%.
Bernie’s commentary – good timing biotech is cheap
Looking at the portfolio, this is essentially a biotech healthcare ETF. And biotech is an interesting case study.
Biotech was perhaps the best performing US equity subsector from 2010 – 2020, rising almost 500%. Yet it has been crushed in a big way this year. Thanks to rising rates, the SPAC bubble popping (lots of SPACs were biotechs) and the retreat of retail day traders – the sector has suffered its biggest correction ever. At the time of writing many biotechs are trading on valuations below their cash reserves.
The correction has become so bad it could create issues for index funds. I was looking at a spreadsheet of global biotech companies a couple of months back – at which point the S&P Biotechnology Select Industry Index was down almost 60% peak to trough - and found that only 75-odd global biotech companies had market caps over $100 million. $100M is the usual minimum threshold for investability for index funds. (However things have improved the past two months).
So I’d guess I’d commend BlackRock for the timing of this ETF launch. They’re launching a biotech ETF at what looks like the bottom of the market. I’m not fully across the logic for targeting neuroscience rather than, say, oncology – which is a deeper market. But I guess there has to be some distinction versus IBB.
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