Investors in large-cap health care stocks, even the supposedly ultra-conservative plays such as blue-chip pharmaceuticals names, have been treated to some stellar returns this year.

That much is affirmed by better than 26 percent year-to-date gains for both the Health Care Select Sector SPDR (XLV) and the Vanguard Health Care ETF (VHT).

Investors willing to take on a bit more risk have captured impressive gains with ETFs such as the iShares Nasdaq Biotechnology ETF (IBB) and the Market Vectors Biotech ETF (BBH). However, all of those ETFs are heavy on large-cap stocks. With the largest pharmaceuticals and biotech names thriving, some investors may wondering if the same can be said of small-cap health care plays.

The PowerShares S&P SmallCap Health Care Portfolio (PSCH) confirms the answer is "Yes, small-cap health care ETFs are tracking their large-cap rivals higher." Actually, in the past 90 days, PSCH, designed to be the small-cap equivalent of XLV, has decoupled from its large-cap rival in stunning fashion. In that time, XLV is up six percent, a decent performance to be sure. PSCH has more than tripled those returns.

Looking at PSCH's 66-stock lineup, it is easy to see why the ETF has recently been offering investors a stunning level of out-performance relative to more traditional health care funds. The PowerShares offering is heavily allocated to biotech names. That makes sense as there are many more small-cap biotech names than there are small, regular pharmaceuticals firms.

PSCH's top-10 holdings include PAREXEL International (PRXL), a provider of clinical research and medical communications services, and Salix Pharmaceuticals (SLXP). S&P Capital IQ has a five-star rating on PAREXEL and a four-star rating on Salix.

Those stocks combine for 9.2 percent of PSCH's weight. "PSCH ranks well for its bullish technical factors and its relatively modest expense ratio," said S&P Capital IQ in a new research note. The firm has an Overweight rating on PSCH.

PSCH does feature 14.2 percent allocation to mid-cap growth names, but this is really a small-cap growth ETF with stocks with that designation accounting for 69.3 percent of the ETF's weight. The fund stacks up favorably against broad market small-cap growth ETFs. For example, the SPDR S&P 600 Small Cap Growth ETF (SLYG) is up 19.2 percent year-to-date. That is nothing to scoff at, but PSCH has jumped nearly 26 percent.

Given its small-cap constituency, speculative investors can embrace PSCH as a play on a potential increase in biotech mergers and acquisitions activity.

In terms of valuation, small-cap growth names usually trade at some premium to the broader market, but PSCH is not too frothy relative to SLYG. The latter has a P/E ratio of 21.36 while PSCH's P/E is 23.48, according to PowerShares data.

PSCH, which debuted in April 2010, has $120.2 million in assets under management and annual fees of 0.29 percent.

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