The growing medical needs of the Baby Boomer generation–now totaling some 83 million people–make healthcare a compelling long-term investment theme. According to XShares Advisors, a New York-based financial services firm, U.S. healthcare is currently a $2 trillion industry, representing 17% of gross domestic product (GDP). By 2015, the government projects healthcare spending will reach $4 trillion, or 20% of GDP. In addition, healthcare stocks have delivered 9%-10% annual growth over the last decade, nearly triple GDP growth.

A unique way to play the “aging of America” might be through a series of exchange-traded funds (ETFs) from XShares Advisors that invest exclusively in particular sub-sectors of the broad health care industry, including life sciences and biotechnology. The HealthShares ETFs–a family of 19 publicly-traded products–each track a proprietary index developed by XShares Group, parent of XShares Advisors. Each underlying index is administered independently by Standard & Poor’s.

For example, one of these ETFs, the HealthShares Orthopedic Repair (HHP) invests in companies engaged in the manufacture, distribution, or commercialization of medical devices, drugs, or regenerative medicine used to treat an array of orthopedic disorders.

The first batch of HealthShares ETFs launched in January 2007. Each ETF consists of 22 to 25 initially equally-weighted stocks, except the broader-focused HealthShares Composite (HHQ), which holds 80 names. Each ETF carries an expense ratio of 0.75%.

Anthony Dudzinski, chief executive officer of XShares Advisors, says these ETFs are distinguished by their focus on smaller companies – indeed, the initial market cap of any holding cannot exceed $15 billion. “Most of the innovation and potential for high growth within health care comes from small- and mid-cap stocks,” Dudzinski says. “For example, within the drug and biotech industry, the 15 largest stocks control about 1,000 FDA trials. But all the remaining companies control about 4,000 trials. Moreover, the large-cap companies tend to have flat to minimal earnings growth projections, while smaller stocks have much greater growth potential.”

Dudzinski also notes that no individual holding in any HealthShares ETF can represent more than 15% of total assets.

However, Srikant Dash, index strategist at S&P, cautions that these types of ETFs may not be suitable for all investors. “These ETFs are extremely narrow and specialized products best left to the judgment of traders or fund managers specializing in the healthcare sector,” he says. “Retail investors without expertise in sub-sector investing should probably avoid very specialized products.”

A full list of HealthShares ETFs is available here.