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

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A smart beta exchange traded fund, the SPDR S&P Insurance ETF (KIE - Free Report) debuted on 11/08/2005, and offers broad exposure to the Financials ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

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

Because the fund has amassed over $452.35 million, this makes it one of the average sized ETFs in the Financials ETFs. KIE is managed by State Street Global Advisors. Before fees and expenses, this particular fund 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

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Annual operating expenses for this ETF are 0.35%, making it one of the cheaper products in the space.

It's 12-month trailing dividend yield comes in at 1.93%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

For KIE, it has heaviest allocation in the Financials sector --about 100% of the portfolio.

When you look at individual holdings, Assured Guaranty Ltd. (AGO - Free Report) accounts for about 2.66% of the fund's total assets, followed by Unum Group (UNM - Free Report) and Allstate Corporation (ALL - Free Report) .

Its top 10 holdings account for approximately 24.15% of KIE's total assets under management.

Performance and Risk

So far this year, KIE has lost about -1.21%, and is up roughly 1.30% in the last one year (as of 06/02/2022). During this past 52-week period, the fund has traded between $36.77 and $42.60.

KIE has a beta of 0.94 and standard deviation of 29.56% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 55 holdings, it effectively diversifies company-specific risk.

Alternatives

SPDR S&P Insurance ETF is an excellent option for investors seeking to outperform the Financials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.

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 $137.69 million in assets, iShares U.S. Insurance ETF has $310.77 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.

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