Exploring Small Biotech ETFs: Five Strategic Funds for Diversified Exposure

The biotech sector represents a compelling but complex investment landscape. For those seeking exposure to innovative therapeutic companies without the risk of betting on individual stocks, small biotech ETFs have emerged as a practical vehicle. These exchange-traded funds pool capital into curated baskets of biotechnology companies, allowing investors to gain sector participation while spreading risk across multiple holdings. As of February 2026, the small biotech ETF market offers several intriguing options across different investment profiles and risk tolerances.

The appeal of small biotech funds lies in their dual advantage: they provide targeted exposure to emerging pharmaceutical and biotech innovations while maintaining the risk mitigation that comes with portfolio diversification. When any single company underperforms, the impact on the overall fund is diluted. This feature makes small biotech ETF strategies particularly attractive for investors seeking to capitalize on sector growth without the volatility associated with standalone stock selection.

Leveraged and Inverse Strategies: For Tactical Biotech Traders

For investors with specific directional views and short-term time horizons, tactical biotech exposure demands different tools than traditional passive holding strategies.

ProShares Ultra NASDAQ Biotechnology ETF (BIB) launched in April 2010 and represents one approach: it utilizes leveraged structures to deliver twice daily long exposure to the broad-based NASDAQ Biotechnology Index. With approximately US$89.54 million in assets under management, this vehicle appeals to bullish investors anticipating near-term sector strength. However, this leveraged small biotech ETF design carries considerable risk and is explicitly unsuitable for buy-and-hold investors or those with conservative risk profiles. Among its 263 holdings, top positions include Gilead Sciences (6.78%), Amgen (6.23%), and Vertex Pharmaceuticals (6.17%).

Direxion Daily S&P Biotech Bear 3X Shares (LABD) pursues the opposite tactic—generating three times the daily inverse return of the S&P Biotechnology Select Industry Index, with AUM of US$68.18 million. This ETF gains value when the index declines and loses value when it rises, employing a fundamentally different operational structure than traditional holdings. Rather than holding individual biotech stocks, LABD utilizes financial derivatives like futures to achieve its inverse exposure, making it distinctly appropriate only for short-term tactical trading.

Thematic and Targeted Biotech Exposure Options

Disease-focused and genomic-centered strategies represent a distinct approach to small biotech ETF investing, allowing investors to align allocations with specific therapeutic breakthroughs.

Tema Heart and Health ETF (HRTS), launched in November 2023, concentrates on biotech companies addressing diabetes, obesity, and cardiovascular pathologies. This small biotech fund’s portfolio comprises 46 holdings—approximately 75% large-cap and 22% mid-cap—with roughly three-quarters domiciled in the United States. The fund’s leadership positions include Eli Lilly (10.04%), Roche Holding (5.42%), and Johnson & Johnson (4.8%). The frequency of the fund’s identity revisions—renamed from Tema Cardiovascular and Metabolic ETF in March, then from GLP-1 Obesity and Cardiometabolic ETF in June—reflects the sector’s rapid evolution and investor demand for targeted exposure.

Global X Genomics & Biotechnology ETF (GNOM) addresses genomic innovation with 50 holdings focused on gene editing, sequencing, genetic medicine, and computational biology. Roughly 90% of its US$51.53 million portfolio concentrates in pharmaceuticals, biotechnology, and life sciences. This small biotech fund’s top three positions—Moderna (6.33%), Arrowhead Pharmaceuticals (6.14%), and Praxis Precision Medicines (5.98%)—position investors at the forefront of genomic advancement.

Index-Based and Sector-Filtered Biotech Selections

For investors preferring systematic, rules-based exposure to the biotech sector, index-tracking and products-focused strategies offer complementary benefits.

Virtus LifeSci Biotech Products ETF (BBP), established in December 2014, tracks the LifeSci Biotechnology Products Index, emphasizing US-listed biotech firms with FDA-approved drug therapies. This small biotech ETF approach targets the product stage of development—from emerging startups to established players—using equal-weighted, semi-annually rebalanced holdings. With AUM of US$44.8 million, its top holdings include ImmunityBio (3.98%), Mirum Pharmaceuticals (2.4%), and Moderna (2.16%), offering investors access to therapeutically validated companies.

Matching Small-Cap Biotech ETFs to Your Investment Profile

Selecting among these small biotech ETF options requires honest alignment between fund characteristics and individual investment objectives. Leveraged vehicles like BIB suit aggressive traders with specific near-term conviction; inverse funds like LABD serve tactical hedging needs but demand sophisticated timing. Thematic funds such as HRTS and GNOM offer concentrated sector plays for conviction investors. Index-tracked options like BBP provide systematic exposure to vetted biotech innovations.

The diversity within the small biotech ETF landscape—spanning aggressive tactical strategies to conservative product-filtered selections—ensures that most investor profiles can locate appropriate vehicles. Data as of February 9, 2026, reflects these offerings’ growing sophistication and specialization, providing a richer toolkit for biotech sector participation than ever before.

This analysis updates previous coverage of small biotech investment vehicles and reflects current market structures. For additional perspectives on biotech sector dynamics, follow ongoing investment research from leading financial platforms.