Making its debut on 11/08/2005, smart beta exchange traded fund State Street SPDR S&P Capital Markets ETF (KCE Quick QuoteKCE - Free Report) provides investors broad exposure to the Financials ETFs category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

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

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.

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 Investment Management, and has been able to amass over $487.92 million, which makes it one of the average sized ETFs in the Financials ETFs. KCE seeks to match the performance of the S&P Capital Markets Select Industry Index before fees and expenses.

The S&P Capital Markets Select Industry Index represents the capital markets segment of the S&P Total Market Index.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for KCE are 0.35%, which makes it one of the least expensive products in the space.

KCE's 12-month trailing dividend yield is 1.79%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. 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.

When you look at individual holdings, Wealthfront Corp (WLTH) accounts for about 1.93% of the fund's total assets, followed by Affiliated Managers Group (AMG) and Sharplink Inc (SBET).

KCE's top 10 holdings account for about 17.34% of its total assets under management.

Performance and Risk

The ETF return is roughly 1.73% and is up roughly 4.37% so far this year and in the past one year (as of 10/19/2026), respectively. KCE has traded between $132.62 and $171.84 during this last 52-week period.

KCE has a beta of 1.24 and standard deviation of 21.37% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 68 holdings, it effectively diversifies company-specific risk .

Alternatives

State Street SPDR S&P Capital Markets 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.

iShares U.S. Broker-Dealers & Securities Exchanges ETF(IAI) tracks Dow Jones U.S. Select Investment Services Index The fund has $1.27 billion in assets. IAI has an expense ratio of 0.37%.

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.