Five years ago, buying a biotech fund meant accepting that you would never know what was inside it and hoping the sector drifted up. Not anymore. On 19 August a single holding rose about 144% in one session on the first successful Phase 3 trial of a personalised mRNA cancer vaccine, and most investors holding biotech through a fund would have struggled to see it in their portfolio value. How a fund is weighted decides how much of a result like that actually reaches you. That's why we built Winvesta Crisps, to decode what's actually moving the funds you own, in plain language, before the consensus catches up. 60,000+ investors from all over India are already in. What about you?
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Moderna and Merck announced on 19 August that their personalised mRNA cancer vaccine, given alongside Merck's Keytruda, met its primary endpoint in a Phase 3 trial of 1,137 patients with surgically removed high-risk melanoma, per STAT and CNBC. It is the first positive Phase 3 result for an individualised neoantigen therapy and for any mRNA-based cancer treatment. Moderna rose about 144% on the day and Merck about 10%. The obvious next thought, for anyone who does not want to own a single clinical-stage company, is to buy the sector through a fund. That thought runs into arithmetic almost immediately, because the two largest biotech funds available to Indian investors are built on opposite principles and would have handed you very different amounts of that day.
🎯 Meet Devika
Devika is 34, works in product at a Bengaluru software company, and has been investing in US equities from India for about four years. Her portfolio is roughly ₹9 lakh: a broad US index fund, three large technology positions, and cash she has not deployed since the market got choppy in August.
She read about the Moderna result on Wednesday evening, and her reaction was the correct one. She does not want to own one biotech company whose value depends on a regulator's decision. She does want exposure to a field that just produced its first genuine proof point after a decade of promises. So she looked up biotech ETFs, found two obvious candidates, and stopped, because their one-year returns were 40 percentage points apart and she could not work out why.
Her question is the one this article answers: given what just happened, and given that long-term US interest rates are at their highest in nearly two decades, should she buy biotech, and if so, through which fund?
📊 What the two funds actually give you
The two funds are the SPDR S&P Biotech ETF (XBI) and the iShares Biotechnology ETF (IBB). They cover the same industry and are constructed in opposite ways.
That table explains the 40-point return gap without any reference to stock picking. IBB is market-cap weighted, so its top ten positions are about 58% of the fund and it behaves like a portfolio of large, commercial-stage biotechnology companies with approved products and revenue. XBI uses a modified equal weight, so its top ten are only about 11% of the fund and roughly 80% of its holdings are mid and small caps, which in this industry means companies whose value rests on trials that have not finished.
Now Devika's arithmetic. In a modified equal-weight fund, a typical position is around 1% of assets. A holding that rises 144% in a day on a roughly 1% weight adds something in the order of 1.5 percentage points to the fund. In a cap-weighted fund, unless the company happens to be among the largest constituents, the same result adds meaningfully less. That is the trade in one line: a basket converts a spectacular single-stock event into a modest fund move, in exchange for making sure that no single failed trial can take a large bite out of your capital.