Try This ETF Pair To Round Out Your Biotech Exposure

The iShares Nasdaq Biotechnology ETF (IBB) is the largest biotech-focused fund there is. With nearly $10 billion in assets, it is THE proxy for the biotech sector for many investors. But is it the best proxy? IBB does a pretty good job of covering the entire biotech sector. It's broadly diversified and covers not only the industry's giants, such as Gilead (GILD), but also the tiny companies that are still pushing their lead drugs through clinical trials. My only real quibble with the fund is its market-cap weighting strategy. It's putting a lot of weight into just a few names, and it's cost shareholders over the last few years.

Over the past three years, IBB has returned precisely 0% with some wild swings in returns along the way. The main culprit is the mega-cap biotechs - Gilead (GILD), Biogen (BIIB), Amgen (AMGN) and Celgene (CELG).

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