Launched on 04/07/2010, the Invesco SP SmallCap Health Care ETF (PSCH) is a passively managed exchange traded fund designed to provide a broad exposure to the Healthcare – Broad segment of the equity market.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
Sector ETFs are also funds of convenience, offering many ways 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 8, placing it in top 50%.
Index Details
The fund is sponsored by Invesco. It has amassed assets over $387.18 million, 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.
Costs
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
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund’s holdings is a valuable exercise. And, 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, Neogen Corp (NEOG) accounts for about 4.62% of total assets, followed by Momenta Pharmaceuticals Inc (MNTA) and Emergent Biosolutions Inc (EBS).
The top 10 holdings account for about 35.37% of total assets under management.
Performance and Risk
Year-to-date, the Invesco SP SmallCap Health Care ETF has gained about 1.57% so far, and was up about 12.96% over the last 12 months (as of 08/10/2020). PSCH has traded between $88.57 and $138.15 in this past 52-week period.
The ETF has a beta of 1.17 and standard deviation of 27.49% for the trailing three-year period, making it a high risk choice in the space. With about 73 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco SP 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 $11.59 billion in assets, Health Care Select Sector SPDR ETF has $23.98 billion. VHT has an expense ratio of 0.10% and XLV charges 0.13%.
Bottom Line
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.
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