Designed to provide broad exposure to the Health Care ETFs category of the market, the SPDR S&P Health Care Equipment ETF (XHE) is a smart beta exchange traded fund launched on 01/26/2011.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors. XHE has been able to amass assets over $403.81 million, making it one of the average sized ETFs in the Health Care ETFs. This particular fund seeks to match the performance of the S&P Health Care Equipment Select Industry Index before fees and expenses.
The S&P Health Care Equipment Select Industry Index represents the health care equipment segment of the S&P Total Market Index.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.35% for this ETF, which makes it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.03%.
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.
XHE’s heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
Looking at individual holdings, Butterfly Network Inc. Class A (BFLY) accounts for about 2% of total assets, followed by Shockwave Medical Inc. (SWAV) and Senseonics Holdings Inc. (SENS).
The top 10 holdings account for about 18.06% of total assets under management.
Performance and Risk
The ETF has lost about -23.54% so far this year and is down about -17.33% in the last one year (as of 12/06/2022). In the past 52-week period, it has traded between $79.20 and $119.53.
XHE has a beta of 0.95 and standard deviation of 29.26% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 82 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Health Care Equipment ETF is a reasonable option for investors seeking to outperform the Health Care ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
First Trust Indxx Medical Devices ETF (MDEV) tracks INDXX GLOBAL MEDICAL EQUIPMENT INDEX and the iShares U.S. Medical Devices ETF (IHI) tracks Dow Jones U.S. Select Medical Equipment Index. First Trust Indxx Medical Devices ETF has $1.89 million in assets, iShares U.S. Medical Devices ETF has $6.34 billion. MDEV has an expense ratio of 0.70% and IHI charges 0.39%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Health Care ETFs.
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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