Biotech ETFs Show Resiliency

Despite recent pullbacks, exchange-traded funds in the biotech sector continue to outperform the market.

The S&P 500 has lost 32% year to date. While the major biotech ETFs have faced resistance, their performance has been nowhere close to that experienced by the broader market indices. So far this year the SPDR Biotech ETF (XBI Quote) and the iShares Nasdaq Biotechnology Fund (IBB Quote) are down only 9.7% and 11.6%, respectively. The Biotech HOLDRS Trust (BBH Quote) is actually up 0.3% year to date.

The relative strength of biotech ETFs has not gone unnoticed by money managers. "We had a buy signal in the spring on biotech," said Jim Porter, portfolio manager of the Aston/New Century Absolute Return ETF Fund (ANENX Quote). "It has substantially outperformed the Russell 3000."

Porter acknowledges that biotech is not in the clear just yet. "The sector has traded sideways since the middle of September," he said. "Venture capital is going to become more and more careful where it invests its money and is going to want larger ownership interests." ...