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 health care companies.
This iShares XHC ETF review will discuss a fund that can give you exposure to the performance of a globally diversified healthcare index that you could consider as a hands-off investment strategy in healthcare stocks.
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.
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.
The fund boasts net assets worth $543.63 million as of April 29, 2022. The underlying holdings for the fund through the US-listed IXJ ETF include UnitedHealth Group, Johnson & Johnson, Pfizer, and several other top healthcare industry giants worldwide.
Investing in XHC ETF means betting on the performance of the top publicly-traded companies in the global healthcare sector.
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.
This section of my iShares XHC ETF review will highlight the top aggregate underlying holdings to provide you with a list of some of the top publicly-traded companies it invests in.
As of April 30, 2022, iShares XHC ETF’s top holding is the US-listed iShares Global Healthcare ETF Trust.
IXJ ETF’s top three holdings comprise UnitedHealth Group Inc., which accounts for 7.02% of its asset allocation.
Johnson & Johnson is its second-largest holding, accounting for 6.86% of its asset allocation.
Pfizer Inc. is its third-largest holding, accounting for 4.03% of its asset allocation. The fund’s top ten holdings account for 41.26% of its entire asset allocation.
This section of my iShares XHC ETF review will cover the performance and returns of the healthcare ETF since its inception.
The fund started trading on the TSX on April 12, 2011, and it boasts an extensive performance history for you to see how well the fund has performed in the past.
The chart above shows the growth of a hypothetical $10,000 invested in iShares XHC ETF since its inception on April 12, 2011.
As the chart shows, a hypothetical $10,000 invested in iShares XHC ETF on its inception would be worth almost four times as of writing.
As you can see, the fund has experienced dips in its performance despite the resilience of the global healthcare sector.
The sharpest decline in its returns came during the onset of COVID-19, when the healthcare crisis rattled global equity markets. However, the fund’s performance since and before then has been relatively good.
The fund’s performance has remained consistently good since its inception over ten years ago.
However, the total return of iShares XHC ETF has been historically less than the index it uses as its benchmark.
iShares XHC ETF’s average annual returns in the last ten years are 13.45%, reflecting a stellar performance.
iShares XHC ETF is a low-cost fund that invests in a relatively low-risk asset class, and it mitigates capital risk by diversifying its asset allocation on healthcare companies operating in different parts of the world.
It is a passively-managed fund in that it merely mirrors the performance of the US-listed iShares IXJ ETF and hedges the returns back to the Canadian dollar to mitigate currency fluctuation risks.
XHC ETF does rely on currency hedging to provide you with returns, and that comes at a cost. It boasts a management fee of 0.63% and a Management Expense Ratio (MER) of 0.65%.
As of April 28, 2022, iShares XHC ETF’s distribution yield is as follows:
- 12-month trailing distribution yield: 0.82%
- Distribution frequency: Semi-Annual
iiShares XHC ETF is designed to provide you with investment returns based on the performance of a globally diversified portfolio of healthcare stocks.
The goal of the fund is not necessarily to deliver shareholder distributions, but the fund does disburse cash payouts semi-annually.
The primary goal of the fund is to deliver long-term capital growth by replicating the performance of the S&P Global 1200 Health Care Canadian Dollar Hedged Index.
The fund makes up for a lack of substantial cash distributions through superior total returns through capital gains, as evidenced by its performance since its inception.
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.
Equity securities listed in the United States account for the bulk of its asset allocation, with a 71.52% asset allocation.
Switzerland-listed stocks account for 8.60% of its asset allocation, followed by UK-listed equity securities, accounting for 4.65% of its asset allocation.
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.
It uses currency hedging to ensure that your investment returns are not impacted by any fluctuations between the base currency of the underlying fund and the Canadian dollar.
This section of my iShares XHC ETF review will discuss a few funds that you could compare this product to as potential alternatives to investing in this bond ETF.
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.
You could look into something like Norbert’s Gambit to mitigate some of the foreign exchange fees.
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 with a 12-month trailing yield of 3.07% as of April 28, 2022.
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 0.38% expense ratio, which is significantly lower than iShares XHC ETF. It could be a viable alternative for you to consider.
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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. Still, the fund has more than made up for a lack of dividends to its existing investors by delivering nearly four-fold returns since its inception.
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.