BBH's 25 Stocks Beat FHLC on Return, Lost on Volatility
A 25-stock biotech fund returned 40.5% in a year. A 365-holding healthcare fund did better per unit of risk. The gap explains what concentration actually buys.
The VanEck Biotech ETF (BBH), which holds a concentrated 25-stock portfolio, gained 40.5% over one year, while the 365-holding Fidelity Healthcare ETF (FHLC) produced better risk-adjusted returns with half the volatility.
Two healthcare funds, two opposite bets on how many stocks an investor needs. Over the past year the concentrated one won on the scoreboard and the diversified one won on the ride.
The VanEck Biotech ETF (BBH) holds just 25 stocks and returned 40.5% over one year. The Fidelity Healthcare ETF (FHLC) spreads the same broad sector across 365 holdings and, on a risk-adjusted basis, came out ahead — delivering superior returns per unit of risk with roughly half the volatility, according to the comparison published by Motley Fool.
That is not a contradiction. It is the entire argument about concentration compressed into one sector and one year.
What 25 holdings versus 365 actually does to a portfolio
Volatility is the measure of how violently a fund's price swings around its own trend. A fund with half the volatility of another can deliver the same journey with far less white-knuckle drawdown along the way — and, crucially, is far easier for a real human being to hold through a bad quarter.
BBH's 25 positions mean a single clinical readout, a single FDA decision, or a single acquisition rumour can move the whole fund. With 365 holdings, FHLC dilutes any one of those events to near-irrelevance. Healthcare as Fidelity defines it also reaches well beyond drug developers: it takes in insurers, hospital operators, device makers, distributors and diagnostics companies, most of which have revenue that does not depend on a binary trial outcome.
Biotech, by contrast, is the highest-beta corner of healthcare. When rates fall and risk appetite returns, it runs hard. The 40.5% one-year gain is what that looks like on the upside. The same mechanics work in reverse.
Where both funds are trading right now
As of 16:24 GMT on Thursday, 24 September 2026, BBH was quoted at 241.36, up 0.48% on the day from a previous close of 240.21, with an intraday range of 240.96 to 243.39. FHLC was at 82.35, up 0.73% from a prior close of 81.75, trading between 81.71 and 82.91.
Both were green against a softer tape. The S&P 500 tracker SPY was at $766.84, down 0.13%; the Nasdaq 100 proxy QQQ sat at $739.27, off 0.26%; and the Dow tracker DIA was at $512.92, down 0.27%. Healthcare outperforming on a mildly negative session is a familiar defensive pattern, though a single day proves nothing.
Note the difference in price per share: BBH trades at nearly three times FHLC's level. That has no bearing on returns — it only affects how finely an investor with a fixed dollar amount can size a position, which matters more for small accounts and for anyone building in regular instalments.
Which investor each fund is actually built for
The honest answer is that these two products are not really competing for the same slot in a portfolio.
- FHLC works as a core sector holding. With 365 names covering the full healthcare supply chain, it is the kind of position an investor can size meaningfully — mid-to-high single-digit percentage of a portfolio — and leave alone. Lower volatility means less temptation to sell at the wrong moment.
- BBH works as a satellite. A 25-stock biotech basket is closer to an expression of a view than a diversified allocation. It suits an investor who explicitly wants biotech exposure, understands that the drawdowns will be deep, and sizes accordingly.
- Overlap is real. FHLC's healthcare universe already contains large-cap biopharma. Buying both does not double diversification; it tilts an existing healthcare allocation further toward drug development.
There is also the behavioural point that risk-adjusted return statistics are designed to capture. A fund that returns more but swings twice as hard tends to produce worse outcomes for the person holding it, because fewer people hold it all the way through. The gap between a fund's published return and its investors' realised return is largely a story about volatility.
The costs and mechanics worth checking before buying
The honest answer is that these two products are not really competing for the same slot in a portfolio.
Neither fund's expense ratio was disclosed in the comparison, and it should be the first line item any buyer looks up on the issuer's own fact sheet. Concentrated thematic funds generally carry higher fees than broad sector index products, and over a multi-year hold the difference compounds against the investor quietly.
Three other items to verify directly:
- Top-holding weights. In a 25-stock fund, the largest position can dominate performance. Knowing the top five weights tells you what you actually own.
- Rebalancing rules. Whether a concentrated index caps individual positions determines how quickly a winner becomes a risk.
- Bid-ask spreads and average volume. Narrower funds trade less. The cost of getting in and out is part of the total cost of ownership, and it shows up in an investor's fill price rather than in the fee line.
What determines whether the 40.5% repeats
One year of outperformance is one year. The forces that carried biotech — funding conditions, merger appetite among large pharmaceutical buyers, and the regulatory environment for approvals — are cyclical and can reverse faster than the diversified end of healthcare.
Managed-care and services companies inside FHLC's broader basket face a different set of variables entirely: reimbursement policy, utilisation trends and government programme pricing. Those cycles do not move in lockstep with drug-development sentiment, which is precisely why the blended fund swings less.
For an investor deciding today, the framing is not which fund is better in the abstract. It is whether the portfolio needs healthcare exposure it can forget about, or a deliberate, sized bet on biotech's next leg. The one-year numbers answer both questions at once — just not the same way.
Frequently asked questions
How did BBH and FHLC perform over the past year?
The VanEck Biotech ETF (BBH) returned 40.5% over one year on its concentrated 25-stock portfolio. The Fidelity Healthcare ETF (FHLC), which holds 365 positions, delivered superior risk-adjusted returns with roughly half the volatility. That means FHLC produced more return per unit of risk taken, even though BBH's headline gain was larger over that specific twelve-month window.
What does 'risk-adjusted return' mean for an ETF buyer?
Risk-adjusted return measures how much gain a fund produced relative to how much its price swung along the way. Two funds can post similar returns while one takes a far bumpier path. The smoother fund scores better on a risk-adjusted basis. It matters practically because deep drawdowns push investors to sell at the worst time, eroding their realised return.
Why is a 25-stock fund riskier than a 365-holding one?
With 25 positions, each holding carries a large weight, so a single failed trial, regulatory decision or earnings miss can move the entire fund. Across 365 holdings, any one event is diluted to near-irrelevance. FHLC also spans insurers, hospitals, device makers and distributors, whose revenues are far less dependent on binary clinical outcomes than pure biotech.
What were BBH and FHLC trading at on 24 September 2026?
As of 16:24 GMT on 24 September 2026, BBH was quoted at 241.36, up 0.48% from a previous close of 240.21, with a day range of 240.96 to 243.39. FHLC traded at 82.35, up 0.73% from a prior close of 81.75, ranging between 81.71 and 82.91 during the session.
Does owning both funds add diversification?
Not as much as it appears. FHLC's broad healthcare universe already contains large-cap biopharmaceutical companies, so adding BBH mostly tilts an existing healthcare allocation further toward drug development rather than broadening it. Investors should check the overlap in top holdings on each issuer's fact sheet before assuming the two positions are independent of one another.
What should an investor check before buying either ETF?
Start with the expense ratio on each issuer's fact sheet, since concentrated thematic funds often cost more than broad sector index products and fees compound over time. Then review the top-holding weights, any position caps in the index rules, and the fund's average trading volume and bid-ask spread, which affect the real cost of entering and exiting.
