A sound investment process and strong management team underpin iShares Global Healthcare ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy's effective investment philosophy supports an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in liquidity exposure and an overweight in quality exposure compared with category peers. Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' flexibility. And a high quality exposure is rooted in holding stocks that are consistently profitable, growing, and have solid balance sheets. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

UnitedHealth Group

Eli Lilly

Johnson & Johnson

AbbVie

Merck

AstraZeneca

Novan

Rogers

Thermo Fisher Scientific

Pfizer

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 Global Healthcare ETF earns an Above Average Process Pillar rating. The primary contributor to the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Respectable risk-adjusted performance also influences the rating. This can be seen in the fund's 10-year alpha calculated relative to the category average, which suggests that the process was successful over that period. 

The investment strategy as stated in the fund's prospectus is:  The investment seeks to track the S&P Global 1200 Health Care IndexTM.  The fund generally invests 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 and may invest up to 20% of its assets in certain futures, options and swap contracts, and cash and cash equivalents. The index measures the performance of companies that the index provider deems to be a part of the healthcare sector of the economy and that the index provider believes are important to global markets. 

 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 128 holdings and is relatively concentrated. In particular, 42.3% of the fund’s assets are housed within the top 10 holdings, compared with the category’s 39.2% average. And finally, in terms of portfolio turnover, this portfolio turns over its holdings less quickly than peers, potentially leading to lower costs for investors and eliminating a drag on performance.

Above Average

Process

iShares Global Healthcare ETF's strong equity team drives the strategy's Above Average People Pillar rating. There are three managers listed on the fund: Greg Savage, Jennifer Hsui, Paul Whitehead. The team is well equipped, with an average of 17 years of portfolio management experience. Together, they manage a total of 258 strategies, with a Silver asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha relative to the category median in aggregate. The team has faced turnover as of late, with a manager leaving within the last six 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.

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 Global Healthcare ETF

IXJ tracks a market-cap-weighted index of global health care companies.

The sector as a whole is overvalued by about 15% relative to 11-year averages. Healthcare providers and pharmaceuticals/biotechnology look fairly valued, whereas healthcare equipment is the less attractive subsector. IXJ: a global alternative to XLV.

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As the populations of most wealthy countries continue to age, the healthcare sector is going to benefit irrespective of economic conditions. Investors are continuing to opt for stocks from safer sectors like health care until a better and certain macroeconomic environment starts prevailing. Despite exposing itself to pharmaceutical and biotechnology sectors, iShares Global Healthcare ETF remained steady and generated decent price growth over the past five years.

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iShares Global Healthcare ETF has beaten the S&P 500 over the past 5 years while having less volatility. The IXJ ETF is full of high-quality companies and is globally diversified, lowering the risk of being too focused in the United States.

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Earnings growth can happen in this ETF, which is supported by some insurance economics, but also simple demographics and resilient healthcare demand. Earnings growth is hard to come by in current markets, and can justify a substantial premium over the general market.

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IXJ gives you very broad-based healthcare exposure. But the bet isn't narrow enough to provide a strong angle or particularly good value.

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Pharmaceuticals and biotechnology are cheap relative to 11-year valuation averages. Life science tools and healthcare equipment are overvalued.

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After poor performance during 2015 to 2018, IXJ reshuffled its portfolio. Price return in the past 3 years is good and even better in the longer period.

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Pharma/biotech is the most attractive subsector. The most overvalued one is life science tools. IXJ: an alternative to XLV.

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News for iShares Global Healthcare ETF ETF (IXJ)