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Top 10 Financial ETFs

Stocks in this article: PFI PSCF FXO KRE KBE

#5: PowerShares Global Listed Private Equity ETF (PSP)

PSP tracks the Global Listed Private Equity Index. This is a much more unique or niche area of the financial sector including global private banks, investment companies, venture capitalists, brokers and others. These consist of between 40-60 publicly listed companies whose principal business is to invest in and lend capital to privately held companies or what some would term "merchant banking". The expense ratio is .60% which is higher than the group but is a more specialized ETF.

AUM exceeds $267M and average daily trading volume is roughly 352K shares. As of mid-February 2012 the annual dividend was 7.16% and YTD return was 14.77%. The one year return -13.10%.

PSP Top Ten Holdings & Weightings

Data as of First Quarter 2012

  1. Ratos AB (RATO B): 4.88%
  2. Onex: 4.48%
  3. Hal Trust (HAL): 4.44%
  4. Leucadia National Corporation (LUK): 4.23%
  5. 3i Group (III): 3.98%
  6. Partners Group Holding (PGHN): 3.91%
  7. Ares Capital Corporation BDC (ARCC): 3.63%
  8. Wendel Investissement (MF): 3.41%
  9. American Capital Ltd (ACAS): 3.15%
  10. Eurazeo Common Stock (EUZOF): 3.12%

 #4: SPDR S&P Insurance ETF (KIE)

KIE tracks the KBW Insurance Index which is a float adjusted market-modified-market capitalization-weighted index. Beyond that being a mouthful, includes personal and commercial insurance, property/casualty insurance, life insurance, reinsurance, insurance brokerage and financial guarantee.

The fund was launched in November 2005. AUM equal $140M and average daily trading volume is 140K shares. The expense ratio is .35%. As of mid-February 2012 the annual dividend was 1.60% and YTD return was 8.60%%. The one year return was -7.96%.

(Note: The index is much more targeted away from some credit risk associated with banks and brokers but still has ill-defined exposure to it.)

KIE Top Ten Holdings & Weightings

Data as of First Quarter 2012

  1. Assured Guaranty Ltd (AGO): 2.71%
  2. Genworth Financial Inc (GNW): 2.67%
  3. Prudential Financial Inc (PRU): 2.66%
  4. Fidelity National Financial Inc. (FNF): 2.65%
  5. Protective Life Corp (PL): 2.61%
  6. Principal Financial Group (PFG): 2.60%
  7. MetLife Inc (MET): 2.60%
  8. Progressive Corporation (PGR): 2.59%
  9. Aflac Inc (AFL): 2.58%
  10. Cincinnati Financial Corporation (CINF): 2.58%

#3: iShares Dow Jones U.S. Financial Sector Index ETF (IYF)

IYF tracks the index of the same name but is broader than just the banking sector. It was launched in May 2000. The expense ratio is higher than most at .48%. AUM exceeds $462M with average daily trading volume of 375K shares.

As of mid-February 2012 the annual dividend was 1.52% and YTD return was 12.02%. The one year return was -8.78%.

.

IYF Top Ten Holdings & Weightings

Data as of First Quarter 2012

  1. Wells Fargo & Co (WFC): 6.84%
  2. JPMorgan Chase & Co (JPM): 6.66%
  3. Citigroup Inc (C): 4.18%
  4. Berkshire Hathaway Inc B (BRK.B): 3.54%
  5. Bank of America Corporation (BAC): 3.38%
  6. U.S. Bancorp (USB): 2.53%
  7. Visa, Inc. (V): 2.47%
  8. American Express Co (AXP): 2.42%
  9. Goldman Sachs Group Inc (GS): 2.23%
  10. Simon Property Group Inc (SPG): 1.87%

#2: Vanguard Financials ETF (VFH)

VFH tracks the MSCI US Investable Market Financials 25/50 Index. The fund was launched in January 2004. The expense ratio is .25%. AUM equal $664M with average daily trading volume of 202K shares.

As of mid-February 2012 the annual dividend was 1.88% and YTD return was 10.93%. The one year return was -9.45%.

VFH Top Ten Holdings & Weightings

Data as of First Quarter 2012

  1. Wells Fargo & Co (WFC): 6.75%
  2. JPMorgan Chase & Co (JPM): 6.67%
  3. Citigroup Inc (C): 4.15%
  4. Berkshire Hathaway Inc B (BRK.B): 3.57%
  5. Bank of America Corporation (BAC): 3.45%
  6. American Express Co (AXP): 2.71%
  7. The Goldman Sachs Group Inc (GS): 2.59%
  8. U.S. Bancorp (USB): 2.53%
  9. Simon Property Group Inc (SPG): 1.80%
  10. MetLife Inc (MET): 1.65%

#1: SPDR Financial Select Sector ETF (XLF)

XLF tracks the overall S&P Financial Select Sector Index. The fund was launched in December 1998 and is the granddaddy of the sector. The expense ratio is .19%. AUM exceed $7.2 billion and average daily trading volume is 77M shares.

As of mid-February 2012 the annual dividend was 1.61% and YTD return was 12.08%. The one year return was -12.11%.

(Note: There are popular leveraged inverse/long ETFs available through ProShares, Direxion and options which may enhance daily trading volume.)

XLF Top Ten Holdings & Weightings

Data as of First Quarter 2012

  1. Wells Fargo & Co (WFC): 9.17%
  2. JPMorgan Chase & Co (JPM): 8.43%
  3. Berkshire Hathaway Inc B (BRK.B): 8.20%
  4. Citigroup Inc (C): 5.35%
  5. Bank of America Corporation (BAC): 4.30%
  6. Goldman Sachs Group Inc (GS): 3.27%
  7. U.S. Bancorp (USB): 3.21%
  8. American Express Co (AXP): 3.02%
  9. Simon Property Group Inc (SPG): 2.38%
  10. MetLife Inc (MET): 2.22%

CONCLUSION

We rank the top 10 ETF by our proprietary stars system as outlined below. If an ETF you're interested in is not included but you'd like to know a ranking send an inquiry to support@ETFDigest.com and we'll attempt to satisfy your interest.


Strong established linked index
Excellent consistent performance and index tracking
Low fee structure
Strong portfolio suitability
Excellent liquidity


Established linked index even if "enhanced"
Good performance or more volatile if "enhanced" index
Average to higher fee structure
Good portfolio suitability or more active management if "enhanced" index
Decent liquidity


Enhanced or seasoned index
Less consistent performance and more volatile
Fees higher than average
Portfolio suitability would need more active trading
Average to below average liquidity


Index is new
Issue is new and needs seasoning
Fees are high
Portfolio suitability also needs seasoning
Liquidity below average

It's also important to remember that ETF sponsors have their own competitive business interests when issuing products which may not necessarily align with your investment needs. New ETFs from highly regarded and substantial new providers are also being issued. These may include Charles Schwab's ETFs and Scottrade's Focus Shares which both are issuing new ETFs with low expense ratios and commission free trading at their respective firms. These may also become popular as they become seasoned. 

For further information about portfolio structures using technical indicators like DeMark and other indicators, take a free 14-day trial at ETF Digest . Follow us on Twitter and Facebook as well and join our group conversations.

You may address any feedback to: feedback@etfdigest.com   

The ETF Digest is long KRE and XLF.

(Source for data is from ETF sponsors and various ETF data providers)

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Dave Fry is founder and publisher of ETF Digest, Dave's Daily blog and the best-selling book author of Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management, published by Wiley Finance in 2008. A detailed bio is here: Dave Fry.

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