In the trailing one month period amid flagging performance in this sector ETF, XLV (Expense Ratio 0.15%) has still managed to attract some inflows to the tune of about $15 million. Year-to-date however, this fund has seen significant outflows of $1.28 billion, however, via redemption pressure. These are quite significant outflows, as they represent about 10% of the overall AUM in the fund itself, which currently sits at $11.8 billion in assets under management.
XLV has notably under-performed the broad market S&P 500 Index year-to-date, showing returns that are noticeably in the red versus about a 4.75% return in the S&P during this time frame. As of now, XLV trails the S&P by approximately 800 basis points. XLV’s top members are as follows: 1) JNJ (11.69%), 2) PFE (7.43%), 3) MRK (6.24%), 4) UNH (4.86%), and 5) AMGN (4.51%). Of course, at first glance here, we see not only some of the largest Pharmaceutical producers but also the fourth largest holding here is UnitedHealth. That health insurer has been in the news this week due to Obamacare’s rising health insurance premiums, which is resulting in disarray once again in the insurance space.
As the presidential election looms closer, it is likely that these concerns and headlines will not go away anytime soon. Thus it makes sense why there may be concern about additional potential downside in the sector, which may have spurred this put buying in XLV.
We have not even spoken about “Biotechs” yet, which of course also fall within the greater “Health Care” category and IBB (iShares Nasdaq Biotechnology, Expense Ratio 0.48%) is actually the second largest fund in the space following XLV, with $7 billion in AUM.
Unlike XLV, IBB has seen dip buyers in 2016, pulling in a net of about $785 million in new assets in spite of the fact that the fund has gotten punished in terms of performance year-to-date (down 21.4%).
We are also watching several “Levered Bear” products here closely given the recent appetite for puts, specifically SICK (Direxion Daily Healthcare Bear 3X, Expense Ratio 0.95%), PILS (Direxion Daily Pharmaceutical & Medical Bear 2X, Expense Ratio 0.80%), LABD (Direxion Daily S&P Biotech Bear 3X, Expense Ratio 0.95%), BIS (ProShares UltraShort Nasdaq Biotechnology, Expense Ratio 0.95%), and RXD (ProShares UltraShort Health Care, Expense Ratio 0.95%).
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.