Bank of America Carrying Financial ETFs

The PowerShares KBW Bank Portfolio (KBWB), which tracks the KBW Bank Index (BKX) has risen more than 25% in 2012.

In contrast, the S&P Bank Sector ETF (KBE), which replicates the S&P Bank Index, has trailed with a return of 23%.

That may be due to the way the indices these funds track are constructed, according to KBW analysts. While the BKX is designed to capture the performance of 24 large-cap banks, with a higher weighting to the biggest banks, the S&P Bank Index is an equally- weighted basket of 50 bank stocks.

The Financial Select Sector SPDR Fund (XLF) also appears to have underperformed, given its exposure to the S&P Financials Select Sector Index, which has trailed other indices.

KBW analysts recommend exposure to KBWB for investors who want an exposure to more large-cap stocks, because it offers a more focused exposure to stocks such as Bank of America and JPMorgan.

The analysts also note that with Bank of America being the big outperformer in the markets now, ETFs without a material weighting to the stock are likely to underperform.

--Written by Shanthi Bharatwaj in New York.



>To contact the writer of this article, click here: Shanthi Bharatwaj.

>To follow the writer on Twitter, go to http://twitter.com/shavenk.

>To submit a news tip, send an email to: [e-mail].

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

« First ‹ Previous 1 2