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

Sweta Killa

Designed to provide broad exposure to the Financials - Brokers/ Capital markets segment of the equity market, the iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI) is a passively managed exchange traded fund launched on 05/01/2006.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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 6, placing it in top 38%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $254.45 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

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.42%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.47%.

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, Goldman Sachs Group Inc (GS) accounts for about 17.28% of total assets, followed by Cme Group Inc Class A (CME) and Morgan Stanley (MS).

The top 10 holdings account for about 76.66% of total assets under management.

Performance and Risk

The ETF has added about 3.19% so far this year and it's up approximately 18.47% in the last one year (as of 01/30/2020). In that past 52-week period, it has traded between $57.67 and $72.04.

The ETF has a beta of 1.06 and standard deviation of 16.31% for the trailing three-year period, making it a high risk choice in the space. With about 30 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 good 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 $38.38 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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iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI): ETF Research Reports
 
Morgan Stanley (MS) : Free Stock Analysis Report
 
The Goldman Sachs Group, Inc. (GS) : Free Stock Analysis Report
 
SPDR S&P Capital Markets ETF (KCE): ETF Research Reports
 
CME Group Inc. (CME) : Free Stock Analysis Report
 
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