Under The Hood: An Unheralded Biotech ETF – iShares NASDAQ Biotechnology Index (IBB)

To the second point, at least PBE does have $147.4 million in assets under management, which should be enough to keep the ETF-assets-under-management fanatics interested despite the fund’s slack volume. More importantly than AUM is that despite PBE’s low volume, the ETF rarely trades at significant discounts or premiums to its net asset value.

For example, in the first quarter, the midpoint of PBE’s bid/ask spread was only 50 to 99 basis points below its NAV one time. In all of 2012, the ETF saw the midpoint of its bid/ask drift 50 to 99 basis points above its NAV just one time, according to PowerShares data, implying PBE is indeed sufficiently liquid.

PBE’s exposure to small-caps, which could benefit from increased FDA approvals or mergers and activity, could make the ETF an interesting complement to a larger position in a fund such as iShares NASDAQ Biotechnology Index (NASDAQ:IBB) or XBI. Additionally, risk-tolerant investors that currently lack biotech exposure may want to consider PBE as well.

This article was originally written by The ETF Professor, and posted on Benzinga.