Investing in health care in Canada is a bit of a tricky task due to our public health care system.
Luckily, we have ETFs we can invest in to get access to global healthcare companies.
This iShares XHC ETF review will discuss a fund that can give you exposure to t a globally diversified healthcare index.
Invest In The Global Healthcare Industry
Invest in iShares XHC ETF to gain exposure to a globally diversified portfolio of healthcare stocks in a single investment product.
- Targeted exposure to equities of issuers in the global healthcare sector
- Can be used to gain access to a global sector
- Low-cost exposure to a wide group of healthcare stocks
- MER is quite high
iShares Global Healthcare Index ETF (CAD-Hedged) (HXC) is a low-cost ETF that offers you exposure to a group of equity securities in the healthcare sector of the global economy.
The fund began trading on the TSX on April 12, 2011, and boasts an extensive performance history.
iShares XHC ETF is designed as a long-term holding that delivers wealth growth through capital gains. It also offers semi-annual cash distributions.
XHC.TO is currently trading at close to $69.49.
XHC Key Facts
As of June 30, 2022:
- Ticker Symbol: XHC.TO
- Exchange: Toronto Stock Exchange
- Assets Under Management: $536 Million
- MER: 0.65%
- 12-Month Trailing Yield: 0.88%
- Currency Traded: CAD
- Number of Underlying Holdings: 116
- Eligible Accounts: Most registered (TFSA, RRSP, etc) and non-registered available
XHC ETF relies on currency hedging, which comes at a cost. It boasts a management fee of 0.63% and a Management Expense Ratio (MER) of 0.65%.
iShares XHC’s dividend yield as of July 26, 2022:
- 12-month trailing yield: 0.86%
- Distribution yield: 0.90%
- Dividend schedule: Semi-Annual
Here’s the growth of a hypothetical $10,000 invested in iShares XHC since inception:
| 1y | 3y | 5y | 10y | Incept. | |
|---|---|---|---|---|---|
| Average Annual Return (%) | 1.37 | 10.87 | 9.40 | 12.58 | 12.58 |
| Benchmark (%) | 1.75 | 11.39 | 9.99 | 13.18 | 13.17 |
iShares XHC ETF is an all-equity ETF because the fund invests the entirety of its assets under management to a globally diversified portfolio of stocks.
The fund can be used to reflect a global sector view of the healthcare industry because it focuses on publicly-traded healthcare companies.
iShares XHC ETF does not directly invest in its underlying holdings. Rather, it allocates its funds to the iShares IXJ ETF, an exchange-traded fund listed on the NYSE Arca Stock Exchange.
iShares XHC ETF uses a currency hedging strategy to provide you with investment returns in Canadian dollars. The strategy mitigates the risk that comes with currency fluctuation.
iShares XHC invests in a globally diversified portfolio of healthcare companies. The fund does not directly invest in the different publicly-traded companies in its holdings.
iShares Global Healthcare ETF Trust (IXJ) is its primary holding, accounting for the entirety of its asset allocation, the returns for which are hedged back to the Canadian dollar.
As of July 27, 2022, iShares XHC ETF’s top holding is the US-listed iShares Global Healthcare ETF Trust:
| Ticker | Name | Sector | Weight (%) |
|---|---|---|---|
| IXJ | ISHARES GLOBAL HEALTHCARE ETF TRUS | Financials | 99.45 |
| EUR | EUR/CAD | Cash and/or Derivatives | 0.17 |
| DKK | DKK/CAD | Cash and/or Derivatives | 0.11 |
| CHF | CHF/CAD | Cash and/or Derivatives | 0.08 |
| CAD | CAD CASH | Cash and/or Derivatives | 0.05 |
| JPY | JPY/CAD | Cash and/or Derivatives | 0.05 |
| USD | USD CASH | Cash and/or Derivatives | 0.05 |
| GBP | GBP/CAD | Cash and/or Derivatives | 0.04 |
| USD | USD/CAD | Cash and/or Derivatives | 0.03 |
| USD | USD/CAD | Cash and/or Derivatives | 0.00 |
iShares XHC ETF’s top three holdings comprise UnitedHealth Group Inc., which accounts for 7.21% of its asset allocation. Johnson & Johnson is its second-largest holding, accounting for 6.55% of its asset allocation.
Pfizer Inc. is its third-largest holding, accounting for 4.19% of its asset allocation. The fund’s top ten holdings account for 41.26% of its entire asset allocation.
| Ticker | Name | Weight (%) | Sector |
|---|---|---|---|
| UNH | UNITEDHEALTH GROUP INC | 7.21 | Health Care |
| JNJ | JOHNSON & JOHNSON | 6.55 | Health Care |
| PFE | PFIZER INC | 4.19 | Health Care |
| ABBV | ABBVIE INC | 3.84 | Health Care |
| LLY | ELI LILLY | 3.73 | Health Care |
| ROG | ROCHE HOLDING PAR AG | 3.41 | Health Care |
| MRK | MERCK & CO INC | 3.32 | Health Care |
| TMO | THERMO FISHER SCIENTIFIC INC | 3.27 | Health Care |
| NOVN | NOVARTIS AG | 2.97 | Health Care |
| AZN | ASTRAZENECA PLC | 2.94 | Health Care |
The S&P Global 1200 Healthcare Sector Index, or the Health Care Index, is the benchmark index used by iShares IXJ ETF to determine its underlying holdings.
The index comprises the equity securities of various globally diversified equity securities of issuers in the healthcare sector worldwide.
The geographical breakdown of its asset allocation below shows where its constituent securities are listed.
As of July 26, 2022, equity securities listed in the United States account for the bulk of its asset allocation, with a 71.17% asset allocation.
Switzerland-listed stocks account for 8.40% of its asset allocation, followed by Japan-listed equity securities, accounting for 4.47% of its asset allocation.
| Type | Fund |
|---|---|
| United States | 71.17 |
| Switzerland | 8.40 |
| Japan | 4.47 |
| United Kingdom | 4.36 |
| Denmark | 3.33 |
| Germany | 1.96 |
| France | 1.95 |
| Australia | 1.82 |
| Cash and/or Derivatives | 0.92 |
| Other | 1.63 |
As of July 26, 2022, its most significant asset allocation is towards the Pharma, Biotech & Life Sciences sectors at 64.86%. Its second most significant sector exposure is towards Health Care Equipment & Services at 34.22%.
| Type | Fund |
|---|---|
| Pharma, Biotech & Life Sciences | 64.86 |
| Health Care Equipment & Services | 34.22 |
| Cash and/or Derivatives | 0.92 |
| Other | 0.00 |
iShares XHC has a medium risk factor.
iShares Global Healthcare ETF is a fund listed on the NYSE Arca Stock Exchange, and it is the primary holding for iShares XHC ETF.
iShares IXJ tracks the performance of the S&P Global 1200 Healthcare Sector Index, before fees and expenses.
The underlying index for the fund is designed to measure the performance of global healthcare, medical equipment, biotechnology, and pharmaceutical companies, including large-, mid-, and small-cap stocks.
iShares XHC provides you with investment returns through iShares IXJ.
iShares IXJ ETF is essentially a mirror of iShares XHC because both funds invest in the same equity securities. IXJ ETF is the primary holding for XHC ETF, and it does not use currency hedging strategies to provide you with investment returns.
The fund comes with an expense ratio of 0.43%, which is much lower than 0.65% for iShares XHC ETF.
iShares IXJ ETF could be a viable alternative to iShares XHC ETF if you want to invest in the performance of the global healthcare sector without currency hedging.
Since it is a US ETF though, you could look into something like Norbert’s Gambit to mitigate some of the foreign exchange fees you’ll have to pay.
iShares XUT ETF is another fund that seeks to provide you with long-term capital growth by tracking the performance of an all-equity index.
However, the fund tracks the performance of the Canadian utility sector by tracking the performance of the S&P/TSX Capped Utilities Index. You can use the fund to invest in the Canadian utility industry.
It comes with an expense ratio of 0.61% and provides you with monthly cash distributions.
It could be a viable alternative to iShares XHC ETF if you would prefer reliable monthly cash distributions in a lower-risk asset class.
TD Global Healthcare Leaders Index ETF is another fund designed to provide you with investment returns based on the performance of the global healthcare industry.
The fund tracks the performance of the Solactive Global Healthcare Leaders Index.
The fund’s underlying index focuses primarily on large- and mid-capitalization publicly-traded healthcare companies worldwide.
It shares a few commonalities with iShares XHC in its top holdings, but the two funds do not allocate funds to these securities with the same weighting.
TDOC ETF comes with a 0.35% expense ratio, which is significantly lower than iShares XHC ETF. It could be a viable alternative for you to consider.
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Conclusion
iShares Global Healthcare Index ETF (CAD-Hedged) offers you one of the best ways to express a global sector view in a single investment.
iShares XHC ETF could be a viable investment if you want a hands-off solution for reliable long-term investment returns through capital gains.
Remember that you might not get much in terms of cash distributions.
If you want to invest in ETFs that deliver monthly cash distributions, you should check out my breakdown of the best monthly dividend ETFs in Canada.
