2026 Healthcare ETFs: Biotech Shines While Devices Struggle

The healthcare sector is witnessing significant changes in its exchange-traded funds (ETFs) landscape as we move through 2026. Investors are particularly focused on the performance of biotech and medical device funds, which show contrasting trends this year.

Top-Performing Biotech ETFs

Leading the charge in the healthcare ETF space are the biotech-focused funds. The iShares Nasdaq Biotechnology ETF (IBB) has reported an impressive year-to-date return of 26.79%, while the SPDR S&P Biotech ETF (XBI) follows closely with a 24.82% gain. Although XBI has seen some cooling in momentum recently, these funds are on the radar of cost-conscious investors.

Evaluating Costs and Options

For those keeping an eye on expenses, the expenses ratios of the XLV and Fidelity MSCI Healthcare ETF (FHLC) stand at a low 0.08%. The Vanguard Health Care ETF (VHT) is a close competitor with a ratio of 0.09%, while the iShares U.S. Healthcare ETF (IYH) charges a slightly higher fee of 0.37%. With XLV boasting the largest asset base of $49.19 billion, its size continues to attract investors.

Struggles in Medical Device ETFs

While biotech funds are thriving, the medical device sector has been less fortunate. The iShares U.S. Medical Devices ETF (IHI) shows a year-to-date decline of 8.72% and is down 5.66% over the past year. A major concern for IHI is its high concentration; its top ten holdings account for an overwhelming 76.12% of the fund. This is dominated by major players like Abbott Laboratories (18.06%) and Intuitive Surgical (14.62%), meaning the fund's performance heavily relies on a few large stocks.

However, there are signs of a potential turnaround. IHI recently posted a one-month return of 12.01%, marking the best performance among the ETFs discussed, despite its struggles overall this year.

Global Market Perspectives

The iShares Global Healthcare ETF (IXJ) has performed better, showing gains of 16.61% year-to-date and 25.37% over the past year. While it still underperforms the U.S.-specific funds by a few percentage points, it has recently outpaced them, reporting a one-month return of 11.61%. This indicates a rising interest in international healthcare investments.

Investor Takeaways

• Biotech Dominance: The IBB and XBI lead as the top-performing healthcare ETFs, attracting investor interest due to strong returns.
• Investment Choices Matter: Funds like XLV, IYH, FHLC, and VHT are closely matched in performance, making costs and fund concentration key factors in selection.
• Challenges for Medical Devices: Despite a month of recovery, IHI's overall performance has been lackluster.
• Diverse Exposure: ETF concentration varies significantly, with top-10 holdings ranging from 18.18% in XBI to a staggering 76.12% in IHI.

Common Queries Regarding Healthcare ETFs

• Which healthcare ETF is performing best? As of now, IBB leads with a YTD return of 26.79%, followed by XBI at 24.82%.
• What is the biggest healthcare ETF? XLV remains the largest ETF in this sector, boasting assets worth $49.19 billion.
• What about costs? The most affordable options are XLV and FHLC, offering the lowest expense ratios of 0.08%.
• What's the difference between IBB and XBI? IBB is more focused on larger biotech companies, while XBI includes a mix of small- and mid-size firms with broader diversification.
• Should I choose XLV or VHT? Both have low costs and similar returns, but they differ in market capitalization focus—XLV is concentrated in mega-caps while VHT is more diversified across all caps.

Note: Past performance does not guarantee future results. This information is for educational purposes and should not be seen as financial advice.