Quick Read – FBT’s equal-weight design beat IBB by 35 percentage points over five years, returning 47% versus IBB’s 13% despite carrying a higher expense ratio. – IBB puts nearly 30% into four mega-caps (Vertex, Amgen, Gilead, and Regeneron), making it behave more like a…
fensive healthcare fund than a discovery-cycle bet. – Equal-weighting punishes harder during biotech downturns but captures far more on the rebound, as the biotech cycle from 2021 to 2023 clearly demonstrated. – Biotech investors picking between the First Trust NYSE Arca Biotechnology Index Fund (NYSEARCA:FBT) and the iShares Biotechnology ETF (NASDAQ:IBB) often treat them as interchangeable proxies for the same sector. In practice, they behave very differently
One equal-weights roughly 30 biotech names and rebalances quarterly. The other concentrates almost 30% of its assets in four mega-cap drugmakers. That single design choice has driven a return gap of more than 34 percentage points over the past five years.
What Each Fund Is Actually Betting On FBT tracks the NYSE Arca Biotechnology Index, an equal-dollar-weighted basket rebalanced quarterly. Every constituent gets roughly the same slice on rebalance day, which means a $2 billion clinical-stage name carries the same weight as a $150 billion cash-flow machine. The implicit bet is that innovation and pipeline breakouts, not incumbent scale, drive biotech returns.