Is SPDR S&P Capital Markets ETF (KCE) a Strong ETF Right Now?
Launched on 11/08/2005, the SPDR S&P Capital Markets ETF (KCE) is a smart beta exchange traded fund offering broad exposure to the Financials ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Managed by State Street Global Advisors, KCE has amassed assets over $224.68 million, making it one of the average sized ETFs in the Financials ETFs. This particular fund, before fees and expenses, seeks to match the performance of the S&P Capital Markets Select Industry Index.
The S&P Capital Markets Select Industry Index represents the capital markets segment of the S&P Total Market Index.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.35% for KCE, making it one of the cheaper products in the space.
It's 12-month trailing dividend yield comes in at 1.97%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
KCE's heaviest allocation is in the Financials sector, which is about 100% of the portfolio.
When you look at individual holdings, Coinbase Global Inc Class A (COIN) accounts for about 2.35% of the fund's total assets, followed by B. Riley Financial Inc (RILY) and Hamilton Lane Inc Class A (HLNE).
Its top 10 holdings account for approximately 18.9% of KCE's total assets under management.
Performance and Risk
The ETF has added about 15.07% so far this year and was up about 14.22% in the last one year (as of 08/31/2023). In the past 52-week period, it has traded between $71.56 and $92.85.
The fund has a beta of 1.18 and standard deviation of 23.44% for the trailing three-year period, which makes KCE a high risk choice in this particular space. With about 67 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Capital Markets ETF is not a suitable option for investors seeking to outperform the Financials ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
IShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI) tracks Dow Jones U.S. Select Investment Services Index. The fund has $393.40 million in assets. IAI has an expense ratio of 0.40%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Financials ETFs.
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
iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI): ETF Research Reports
Hamilton Lane Inc. (HLNE) : Free Stock Analysis Report
B. Riley Financial, Inc. (RILY): Free Stock Analysis Report
Coinbase Global, Inc. (COIN) : Free Stock Analysis Report
