iShares US Pharmaceuticals ETF earns a Morningstar Medalist Rating of Neutral with strength in areas such as People offset by weaker spots such as Process. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy gets a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in yield exposure and an underweight in volatility exposure compared with category peers. High yield exposure is attributed to holding more stocks with high dividend or buyback yields. And low volatility exposure is rooted in stocks that have a lower standard deviation of returns. The equity team managing the passive product drives the strategy's Above Average People Pillar rating. The strategy belongs to a strong firm that earns an Above Average Parent Pillar rating. The firm, for example, has had overall attractive fees and a favorable lineup success ratio.

Analyst Rating

Johnson & Johnson

Eli Lilly

Merck

Bristol-Myers

Viatris

Pfizer

Zoetis

Royalty Pharma

Jazz Pharmaceuticals

Catalent

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. iShares US Pharmaceuticals ETF earns a Below Average Process Pillar rating. The process benefits from the parent firm's five-year risk-adjusted success ratio of 60%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. However, the rating is limited by the fund's unremarkable long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period. 

The investment strategy as stated in the fund's prospectus is:  The investment seeks to track the investment results of the Dow Jones U.S. Select Pharmaceuticals Index.  The fund generally will invest at least 80% of its assets in the component securities of its underlying index and in investments that have economic characteristics that are substantially identical to the component securities of its underlying index. The underlying index measures the performance of the pharmaceuticals sector of the U.S. equity market. The underlying index includes pharmaceutical companies such as manufacturers of prescription or over-the-counter drugs or vaccines. The fund is non-diversified. 

 The portfolio has allocations in its top two sectors, healthcare and energy, that are similar to the category. The sectors with low exposure compared to category peers are technology and basic materials; however, the allocations are similar to the category. The portfolio is positioned across 44 holdings and is quite concentrated. In particular, 77.2% of the strategy's assets are housed within the top 10 holdings, as opposed to the category’s 39.2% average. And finally, in terms of portfolio turnover, this portfolio's holdings turn over more often than comparable products in its peer group, possibly resulting in higher costs for investors and a drag on performance.

Below Average

Process

iShares US Pharmaceuticals ETF's strong equity team drives the strategy's Above Average People Pillar rating. There are three managers listed on the fund: Paul Whitehead, Jennifer Hsui, Greg Savage. The team is well equipped, with an average of 17 years of portfolio management experience. Together, they manage a total of 258 strategies, with solid long-term prospects. The strategies average a Silver asset-weighted Morningstar Medalist Rating, indicating a position to deliver positive alpha relative to the category median in aggregate. The team has undergone a bout of turnover recently, with Amy Whitelaw leaving within the last five months. Even though it is a passive fund, high turnover can still hinder the effectiveness of the investment process. 

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Above Average

People

BlackRock offers compelling options across asset classes and vehicles. It earns an Above Average rating for Parent. 
The firm’s approximately USD 8 trillion in assets under management, as of Sept. 30, 2022, gives it unparalleled scale and influence. It is a market-leading index fund provider globally, and its iShares exchange-traded fund franchise offers a low-cost lineup of core funds that investors can use to build a well-diversified portfolio for dirt cheap. The firm can be more adventurous in its ETF launches than some peers, so not everything it launches is appropriate for the masses. As a result, it is likely to have more ETF closures than peers that stick to the basic building blocks.  
The firm’s active fixed-income and multi-asset efforts also stand out as some of the best in the industry. Those benefit from BlackRock’s commitment to building a first-class risk management system via its Aladdin analytics software. The software is also available for sale to other firms and has proved to be a popular option for competitors, a testament to its usefulness. 
More recently, the firm has shifted its focus to ESG offerings and incorporating ESG across its investment lineup, leading to a political backlash in the United States.
BlackRock isn’t the best at everything it tries to do, but retail investors, financial advisors, and large institutions could all build robust portfolios using BlackRock’s products.

Parent

iShares U.S. Pharmaceuticals ETF

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