Defiance unveils junior biotech ETF

Aug 4th, 2020 | By | Category: Equities

Defiance ETFs has launched a new thematic equity ETF providing exposure to small-cap biotechnology companies.

Matthew Bielski, CEO of Defiance ETFs

Matthew Bielski, CEO of Defiance ETFs.

The Defiance Nasdaq Junior Biotechnology ETF (IBBJ US) has listed on NYSE Arca and comes with an expense ratio of 0.45%.

The fund is linked to the Nasdaq Junior Biotechnology Index which consists of Nasdaq-listed stocks, including American Depository Receipts, of firms that are classified as either biotechnology or pharmaceutical according to the Industry Classification Benchmark.

Eligible securities must have a market capitalization between $150 million and $5 billion and an average daily traded value of at least $100,000.

Constituents are weighted by market capitalization subject to a cap of 8% on each of the five largest securities and a cap of 4% on any other security. Index reconstitution and rebalancing occur semi-annually.

The index currently consists of 176 securities and is dominated by stocks listed in the US which accounts for 85.0% of the total weight. The next largest country exposures are Canada (5.4%), Belgium (4.6%), and China (2.9%).

The index is well-diversified at the security level with the largest constituent – ImmunoMedics – holding a weight of just 3.2%.

According to Defiance, the ETF enjoys several tailwinds including a Food and Drug Administration that is more receptive to cutting-edge and rare-disease therapies, increased patient lobbying and a greater willingness by insurers to pay for treatments, the potential for growth through mergers and acquisitions, a dovish Federal Reserve, and the US government’s recent gigantic aid package aimed at small- and mid-sized companies.

The biotechnology sector has also performed favourably during the Covid-19 market environment as investors have supported companies racing for a solution to the current pandemic.

The largest biotech ETF is the $9.8bn iShares Nasdaq Biotechnology Index ETF (IBB US) which is up 15.2% year-to-date (3 August) compared to just 3.2% for the S&P 500. The fund has also recorded four straight months of net inflows, raking in over $1.5bn in new assets since April.

Matthew Bielski, Chief Executive Officer at Defiance ETFs, commented, “At Defiance, we believe in providing the next generation of investors with targeted exposure to disruptive themes. IBBJ does just that, offering exposure to the junior disruptors in the biotech space and allowing investors to express either a short- or long-term view.”

Cameron Lilja, Vice President and Head of Index Research and Development for Nasdaq Global Indexes, added, “Nasdaq works with a global community of healthcare leaders including 98% of US-listed biotech companies. The Nasdaq Junior Biotechnology Index allows investors to track the performance of small and mid-cap biotechnology companies and our work with Defiance ETFs empowers investors with access to this important center of innovation.”

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