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Should You Invest in the iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI)?

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If you're interested in broad exposure to the Financials - Brokers/ Capital markets segment of the equity market, look no further than the iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI), a passively managed exchange traded fund launched on 05/01/2006.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Brokers/ Capital markets is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 11, placing it in bottom 31%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $226.85 M, making it one of the average sized ETFs attempting to match the performance of the Financials - Brokers/ Capital markets segment of the equity market. IAI seeks to match the performance of the Dow Jones U.S. Select Investment Services Index before fees and expenses.

The Dow Jones U.S. Select Investment Services Index measures the performance of the investment services sector of the U.S. equity market.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.43%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.44%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Financials sector--about 100% of the portfolio.

Looking at individual holdings, Cme Group Inc Class A (CME) accounts for about 10.17% of total assets, followed by Goldman Sachs Group Inc (GS) and Morgan Stanley (MS).

The top 10 holdings account for about 66.82% of total assets under management.

Performance and Risk

So far this year, IAI return is roughly 9.66%, and is down about -5.29% in the last one year (as of 01/21/2019). During this past 52-week period, the fund has traded between $52.67 and $70.28.

The ETF has a beta of 1.06 and standard deviation of 18.39% for the trailing three-year period, making it a high risk choice in the space. With about 29 holdings, it has more concentrated exposure than peers.

Alternatives

IShares U.S. Broker-Dealers & Securities Exchanges ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, IAI is a sufficient option for those seeking exposure to the Financials ETFs area of the market. Investors might also want to consider some other ETF options in the space.

SPDR S&P Capital Markets ETF (KCE) tracks S&P Capital Markets Select Industry Index. The fund has $42.02 M in assets. KCE has an expense ratio of 0.35%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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SPDR S&P Capital Markets ETF (KCE): ETF Research Reports
 
CME Group Inc. (CME) : Free Stock Analysis Report
 
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