Which Pharmaceutical ETF Is Leading In Inflows? PJP vs. IHE vs. XPH

by on June 6, 2013 | ETFs Mentioned:

The U.S.’s growing aging population has made pharmaceutical spending a significant portion of our nation’s GDP, and has also affected job creation and stock market appreciation. This spike in national interest in healthcare has also occurred on Wall Street, where investors are embracing this market and its attractive growth potential. While there are some potential roadblocks and government decisions that could curb the industry’s growth, there are a few standout funds in the pharmaceutical sector battling for investor attention: PowerShares Dynamic Pharmaceuticals Portfolio (PJP, B), iShares Dow Jones US Pharmaceuticals Index Fund  (IHE, C+) and SPDR S&P Pharmaceuticals  (XPH, B+) [Download How To Pick The Right ETF Every Time].

Meet the Competitors

Merck Is One Of The Largest Pharmaceutical Firms In The WorldThese three pharmaceutical ETFs are the largest in this small sector of five funds. Holding between $524.2 million and $404.6 million in total assets under management, respectively, and with expense ratios between 60 and 35 basis points they are all relatively inexpensive funds. While PJP and IHE feature a significant tilt to giant corporations, with names like Pfizer, Merck and Abbott taking up a larger chunk of holdings,  XPH instead focuses about 60% of its equal weight assets on medium to small U.S. laboratories [also see Obama Victory Puts Healthcare ETFs In Focus].

None of the funds have had six straight good years, but XPH came very close before 2012. With Obama’s reelection at the end of that year signalling that the current government healthcare spending and investments would likely continue on track for at least four more years, investors have plunged back into the business with new vigor. The recent annual returns are another positive note for the healthcare ETFs, with all the funds featuring strong returns after quickly recovering from the 2008 recession [try our Free ETF Head-To-Head Comparison Tool].

The Bottom Line

Across the board, healthcare ETFs have fared quite well over the years, generating attractive double-digit returns. Pharmaceuticals have delivered stellar performances, particularly in 2012 and so far in 2013. With PJP and XPH slightly outpacing IHE, it seems that the selective process PJP charges extra for and XPH’s small cap focused strategy have paid off for the funds [also see The 3 Best (And 3 Worst) ETF Performers Over The Last 3 Years]. 

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Disclosure: No positions at time of writing.