Looking for broad exposure to the Financials - Regional Banks segment of the equity market? You should consider the SPDR S&P Regional Banking ETF (
KRE Quick Quote KRE - Free Report) , a passively managed exchange traded fund launched on 06/19/2006.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Regional Banks is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 12, placing it in bottom 25%.
The fund is sponsored by State Street Global Advisors. It has amassed assets over $2.80 billion, making it one of the largest ETFs attempting to match the performance of the Financials - Regional Banks segment of the equity market. KRE seeks to match the performance of the S&P Regional Banks Select Industry Index before fees and expenses.
The S&P Regional Banks Select Industry Index represents the regional banks segment of the S&P Total Market Index.
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 0.35%, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 3.54%.
Sector Exposure and Top Holdings
ETFs offer a 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.
This ETF has heaviest allocation in the Financials sector--about 100% of the portfolio.
Looking at individual holdings, Western Alliance Bancorp (
WAL Quick Quote WAL - Free Report) accounts for about 2.38% of total assets, followed by Pinnacle Financial Partners ( PNFP Quick Quote PNFP - Free Report) and Zions Bancorp Na ( ZION Quick Quote ZION - Free Report) .
The top 10 holdings account for about 21.34% of total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Regional Banking ETF has lost about -24.88% so far, and is down about -29.04% over the last 12 months (as of 09/11/2023). KRE has traded between $36.08 and $65.49 in this past 52-week period.
The ETF has a beta of 1.13 and standard deviation of 33.28% for the trailing three-year period, making it a high risk choice in the space. With about 141 holdings, it effectively diversifies company-specific risk.
SPDR S&P Regional Banking ETF sports a Zacks ETF Rank of 4 (Sell), which is based on expected asset class return, expense ratio, and momentum, among other factors. KRE, then, is not the best option for investors seeking exposure to the Financials ETFs segment of the market. Instead, there are better ETFs in the space to consider.
Invesco KBW Regional Banking ETF (
KBWR Quick Quote KBWR - Free Report) tracks KBW Nasdaq Regional Banking Index and the iShares U.S. Regional Banks ETF ( IAT Quick Quote IAT - Free Report) tracks Dow Jones U.S. Select Regional Banks Index. Invesco KBW Regional Banking ETF has $57.37 million in assets, iShares U.S. Regional Banks ETF has $649.58 million. KBWR has an expense ratio of 0.35% and IAT charges 0.40%. Bottom Line
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