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Should You Invest in the PowerShares S&P SmallCap Financials Portfolio (PSCF)?

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Launched on 04/07/2010, the PowerShares S&P SmallCap Financials Portfolio (PSCF - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Financials - Broad segment of the U.S. equity market.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 13, placing it in bottom 19%.

Index Details

The fund is sponsored by Invesco Powershares. It has amassed assets over $224.62 M, making it one of the average sized ETFs attempting to match the performance of the Financials - Broad segment of the U.S. equity market. PSCF seeks to match the performance of the S&P SmallCap 600 Capped Financials and Real Estate Index before fees and expenses.

The S&P SmallCap 600 Capped Financials and Real Estate Index is designed to measure the overall performance of common stocks of US financial services companies.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.29%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 2.30%.

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 75.90% of the portfolio. Real Estate and Energy round out the top three.

Looking at individual holdings, Evercore Inc (EVR - Free Report) accounts for about 2.14% of total assets, followed by Firstcash Inc (FCFS - Free Report) and Selective Insurance Group Inc (SIGI - Free Report) .

The top 10 holdings account for about 18.33% of total assets under management.

Performance and Risk

So far this year, PSCF has lost about -1.87%, and is up roughly 8.02% in the last one year (as of 04/12/2018). During this past 52-week period, the fund has traded between $48.81 and $56.52.

The ETF has a beta of 0.94 and standard deviation of 16.36% for the trailing three-year period, making it a medium risk choice in the space. With about 126 holdings, it effectively diversifies company-specific risk.

Alternatives

PowerShares S&P SmallCap Financials Portfolio carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, PSCF 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.

Vanguard Financials ETF (VFH - Free Report) tracks MSCI US Investable Market Financials 25/50 Index and the Financial Select Sector SPDR Fund (XLF - Free Report) tracks Financial Select Sector Index. Vanguard Financials ETF has $7.84 B in assets, Financial Select Sector SPDR Fund has $31.45 B. VFH has an expense ratio of 0.10% and XLF charges 0.13%.

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.