State Street has three interesting financial sector ETFs that are now listed and trading. The three new funds are the streetTRACKS KBW Bank ( KBE), streetTRACKS KBW Capital Markets ( KCE) and streetTRACKS KBW Insurance ETF ( KIE).

ETF companies have created a lot of "me too" products lately, but these ETFs may have some promise, and I am especially interested in the Capital Markets ETF (KCE).

In general, investing in brokerage stocks, public exchanges and asset managers can be a way to add extra return in the financial sector. Simply put, bull markets and expanding economies may be most evident in this part of the market.

Take a look at Chicago Mercantile ( CME) or Archipelago Holdings ( AX) for some evidence.

Brokers In a Bull Market
Source: Roger Nusbaum

Until the KCE came along, the capital markets portion of the financial sector had been very under-represented in the wave of new investment products over the last couple of years. The largest stocks in this subsector, like Merrill Lynch ( MER) or Morgan Stanley ( MWD), don't have enough weight in the broad financial sector ETFs to allow investors to capture the effect.

KCE isolates this area nicely. The fund's breakdown is 41.53% full-service brokerage, 22.12% asset managers, 16.02% back-office processing, 12.09% discount brokerage, and 8.22% publicly traded exchanges.

Digging further into the nuts and bolts, you might expect some very large holdings in the fund, and there are. Goldman Sachs ( GS) makes up 10%, Merrill Lynch 9.5% and Morgan Stanley 8.5%. This shouldn't be too surprising, because narrow subsector ETFs are likely to always be heavily concentrated in a few holdings.

KCE will not have much, if any, yield. I plugged its holdings into Morningstar's software and saw that the portfolio might yield 1.09%, but the expense ratio of the fund is 35 basis points, leaving 74 basis points. That is my calculation, and State Street has not announced a dividend.

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