Capital Market ETFs for Targeted Financial Sector Exposure
Prominent value investors have picked up large money managers in the financial space. Exchange traded fund investors can also track some of these asset managers through capital market options.
Mario Gabelli, CEO and chairman of Gamco Investors, is adding shares of State Street (STT), Northern Trust (NTRS) and Bank of New York Mellon (BK), and also likes T. Rowe Price (TROW), Legg Mason (LM) and Janus Capital Group (JNS), reports Tom DiChristopher for CNBC.
ETF investors can also gain exposure to these asset managers through the PowerShares KBW Capital Markets Portfolio (KBWC) and SPDR S&P Capital Markets ETF (KCE) .
KBWC includes STT 7.6%, TROW 3.5%, JNS 4.3% and LM 3.4%. KCE follows a more equal-weight indexing approach and holds STT 2.6%, NTRS 2.6%, BK 2.5%, TROW 2.7%, LM 2.9% and JNS 3.0%.
KBWC tracks the KBW Capital Markets Index and KCE tracks the S&P Capital Markets Select Industry Index. Both underlying indices include a group of broker-dealers, asset managers, trust and custody banks or exchanges.
Janus surged 26.9% over the past three months after Bill Gross switched over to the company from PIMCO in September. [These ETFs Could Benefit From Gross Joining Janus]
Bank of New York Mellon recently gave activist investor Nelson Pelts a board seat, but this decision along was not the deciding factor for Gabelli.
“First of all the fundamentals are good,” Gabelli said on CNBC. “Peltz comes along and gives you a little extra tailwind. You’ve got a $40 billion market cap. A lot can be done there.”
Moreover, other large investors have also picked up on BNY. For instance, Warren Buffett held about 23 million shares of BNY as of the end of September.
Looking ahead, the investment banks will seet net interest margins rise. Gabelli believes that interest rates could go up faster than anticipated, which would benefit banks. Additionally, he argues that trust banks have a better outlook since they are more conservative and attentive to how they invest assets to generate higher returns.
PowerShares KBW Capital Markets Portfolio
For more information on the financial sector, visit our financial category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
