Back to top

Image: Bigstock

Is SPDR S&P Insurance ETF (KIE) a Strong ETF Right Now?

Read MoreHide Full Article

Launched on 11/08/2005, the SPDR S&P Insurance ETF (KIE - Free Report) 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.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking 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.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

The fund is managed by State Street Global Advisors. KIE has been able to amass assets over $502.68 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 Insurance Select Industry Index.

The S&P Insurance Select Industry Index represents the insurance 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 this ETF, which makes it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 1.80%.

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.

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

Looking at individual holdings, Athene Holding Ltd. Class A accounts for about 2.48% of total assets, followed by Trupanion Inc. (TRUP - Free Report) and Brighthouse Financial Inc. (BHF - Free Report) .

The top 10 holdings account for about 22.07% of total assets under management.

Performance and Risk

So far this year, KIE has gained about 6.03%, and was up about 18.20% in the last one year (as of 03/30/2022). During this past 52-week period, the fund has traded between $36.65 and $42.60.

The fund has a beta of 0.94 and standard deviation of 29.25% for the trailing three-year period, which makes KIE a medium risk choice in this particular space. With about 56 holdings, it effectively diversifies company-specific risk.

Alternatives

SPDR S&P Insurance ETF is a reasonable option for investors seeking to outperform the Financials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

Invesco KBW Property & Casualty Insurance ETF (KBWP - Free Report) tracks KBW Nasdaq Property & Casualty Index and the iShares U.S. Insurance ETF (IAK - Free Report) tracks Dow Jones U.S. Select Insurance Index. Invesco KBW Property & Casualty Insurance ETF has $91.98 million in assets, iShares U.S. Insurance ETF has $161.39 million. KBWP has an expense ratio of 0.35% and IAK charges 0.42%.

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.

Published in