Looking for broad exposure to the Healthcare – Broad segment of the equity market? You should consider the Invesco S&P SmallCap Health Care ETF (PSCH), a passively managed exchange traded fund launched on 04/07/2010.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare – Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 3, placing it in top 19%.
The fund is sponsored by Invesco. It has amassed assets over $472.22 M, making it one of the average sized ETFs attempting to match the performance of the Healthcare – Broad segment of the equity market. PSCH seeks to match the performance of the S&P SmallCap 600 Capped Health Care Index before fees and expenses.
This Index is comprised of common stocks of U.S. healthcare companies.These are companies that are principally engaged in the business of providing healthcare-related products & services, including biotechnology, pharmaceuticals, medical technology and supplies & facilities and this Index is a subset of the S&P SmallCap 600 Index.
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.29%, making it one of the least expensive products in the space.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Healthcare sector–about 100% of the portfolio.
Looking at individual holdings, Lhc Group Inc (LHCG) accounts for about 5% of total assets, followed by Neogen Corp (NEOG) and Momenta Pharmaceuticals Inc (MNTA).
The top 10 holdings account for about 36.56% of total assets under management.
Performance and Risk
So far this year, PSCH has lost about -5.08%, and it’s up approximately 1.40% in the last one year (as of 02/28/2020). During this past 52-week period, the fund has traded between $107.60 and $138.15.
The ETF has a beta of 1.26 and standard deviation of 19.25% for the trailing three-year period, making it a high risk choice in the space. With about 72 holdings, it effectively diversifies company-specific risk.
Invesco S&P SmallCap Health Care ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, PSCH is a sufficient option for those seeking exposure to the Health Care ETFs area of the market. Investors might also want to consider some other ETF options in the space.
Vanguard Health Care ETF (VHT) tracks MSCI US Investable Market Health Care 25/50 Index and the Health Care Select Sector SPDR ETF (XLV) tracks Health Care Select Sector Index. Vanguard Health Care ETF has $9.33 B in assets, Health Care Select Sector SPDR ETF has $18.66 B. VHT has an expense ratio of 0.10% and XLV charges 0.13%.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.