iShares XHC ETF Review 2022: Invest in Health Care

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.

Our Verdict
iShares XHC ETF Review
8/10Our Score

iShares XHC ETF

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.

Pros
  • 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
Cons
  • MER is quite high

What Is IShares XHC ETF?

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 $63.46.

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

IShares XHC MER And Fees

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 Dividends

iShares XHC’s dividend yield as of July 26, 2022:

  • 12-month trailing yield: 0.86%
  • Distribution yield: 0.90%
  • Dividend schedule: Semi-Annual

IShares XHC Performance And Returns

Here’s the growth of a hypothetical $10,000 invested in iShares XHC since inception:

 1y3y5y10yIncept.
Average Annual Return (%)1.3710.879.4012.5812.58
Benchmark (%) 1.7511.399.9913.1813.17
Source: Blackrock.com

What Does the IShares XHC ETF Invest In?

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 ETF Top Holdings

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:

TickerNameSectorWeight (%)
IXJISHARES GLOBAL HEALTHCARE ETF TRUSFinancials99.45
EUREUR/CADCash and/or Derivatives0.17
DKKDKK/CADCash and/or Derivatives0.11
CHFCHF/CADCash and/or Derivatives0.08
CADCAD CASHCash and/or Derivatives0.05
JPYJPY/CADCash and/or Derivatives0.05
USDUSD CASHCash and/or Derivatives0.05
GBPGBP/CADCash and/or Derivatives0.04
USDUSD/CADCash and/or Derivatives0.03
USDUSD/CADCash and/or Derivatives0.00
Source: Blackrock.com

IShares XHC ETF Aggregate Underlying Holdings

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.

TickerNameWeight (%)Sector
UNHUNITEDHEALTH GROUP INC7.21Health Care
JNJJOHNSON & JOHNSON6.55Health Care
PFEPFIZER INC4.19Health Care
ABBVABBVIE INC3.84Health Care
LLYELI LILLY3.73Health Care
ROGROCHE HOLDING PAR AG3.41Health Care
MRKMERCK & CO INC3.32Health Care
TMOTHERMO FISHER SCIENTIFIC INC3.27Health Care
NOVNNOVARTIS AG2.97Health Care
AZNASTRAZENECA PLC2.94Health Care
Source: Blackrock.com

What Is The Health Care Index? IShares XHC ETF Geographical Breakdown

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.

TypeFund
United States71.17
Switzerland8.40
Japan4.47
United Kingdom4.36
Denmark3.33
Germany1.96
France1.95
Australia1.82
Cash and/or Derivatives0.92
Other1.63
Source: Blackrock.com

iShares XHC ETF Sector Weighting

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%.

TypeFund
Pharma, Biotech & Life Sciences64.86
Health Care Equipment & Services34.22
Cash and/or Derivatives0.92
Other0.00
Source: Blackrock.com

iShares XHC Risk Indicator

iShares XHC has a medium risk factor.

Source: Blackrock.com

What Is the IShares Global Healthcare ETF?

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 XHC ETF Alternatives

IShares XHC ETF Vs. IShares IXJ 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.

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 XHC ETF Vs. IShares XUT ETF

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.

IShares XHC ETF Vs. TDOC ETF

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.

How To Buy IShares XHC ETF In Canada

The cheapest way to buy ETFs is from discount brokers. My top choices in Canada are:

Readers Choice
Qtrade
Qtrade
  • 105 commission-free ETFs to buy and sell
  • Excellent customer service
  • Top-notch market research tools
  • Easy-to-use and stable platform 
Low Fees
Wealthsimple Trade
Wealthsimple Trade
  • Stock and ETF buys and sells have $0 trading fees
  • Desktop and mobile trading
  • Reputable fintech company
  • Fractional shares available
Well-Rounded
Questrade
Questrade
  • ETF buys have $0 trading fees
  • Excellent market research tools
  • Most types of registered accounts available

To learn more, check out my full breakdown of the best trading platforms in Canada.

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.

Photo of author
Author Bio - Christopher Liew is a CFA Charterholder with 11 years of finance experience and the creator of Wealthawesome.com. Read about how he quit his 6-figure salary career to travel the world here.

Check Out These Posts:

Leave a Comment