Given that the financial services sector is the second-largest
sector weight in the S&P 500 and often the industry group most
ensconced in controversy, it can be hard to imagine an ETF that
tracks bank stocks leading an anonymous existence.
In a year when Financial Services Select Sector SPDR (NYSE:
XLF
), the Vanguard Financials ETF (NYSE:
VFH
) and the iShares Dow Jones U.S. Financial Sector Index Fund (NYSE:
IYF
) have produced average returns of almost 24 percent, believing in
a bank ETF's anonymity might seem even harder. Well, believe it or
not, there are some bank funds that toil in obscurity and some
produced excellent returns in 2012.
Take the iShares MSCI ACWI ex US Financials Sector Index Fund
(NASDAQ:
AXFN
) as a prime example. This is a fund that ETF critics would love to
hate for two reasons. First, average daily volume of just 1,440
shares is sure to scare plenty of folks off. Second, making the
volume issue seem all the more off-putting is the fact that the
iShares MSCI ACWI ex US Financials Sector Index Fund does not get
around to trading everyday.
Third, the fund is almost three years old and has just $1.15
million in assets under management. However, AXFN stands as a prime
example of a
small ETF that has delivered big returns in
2012
.
Without the benefits of high-flying U.S. bank names such as Bank
of America (NYSE:
BAC
) and Citigroup (NYSE:
C
), AXFN has surged 26.1 percent. In fact, AXFN's 2012 performance
is arguably more impressive than those of its peers because this
ETF does a better job of spreading its weight around.
AXFN is home to 264 stocks and HSBC (NYSE:
HBC
), the ETF's largest holding, receives a weight of just 4.5
percent. The fund's top-10 holdings represent just 21.4 percent of
AXFN's total weight. By comparison, XLF is home to 83 stocks and
its top-10 holdings account for over half that ETF's weight. Wells
Fargo (NYSE:
WFC
) alone receives an allocation of almost 8.5 percent. IYF's top-10
holdings account for almost 40 percent of that ETF's weight with
Wells Fargo leading the way with an allocation of 6.4 percent.
Additionally, AXFN has not rallied solely on the back of the
most controversial international banking names. Yes, HSBC and
Spain's Banco Santander (NYSE:
SAN
), are top-10 holdings, but so are three Canadian banks. Canadian
banks have long been
viewed as steadier, more conservative
alternatives
to their U.S. peers.
Australian banks, a group that is also further down the
controversy totem pole than U.S. and European equivalents, account
for 11.1 percent of AXFN's weight.
In terms of liquidity, AXFN is not as off-putting as some might
think. Yes, the ETF's average daily volume is paltry, but what is
more important than an ETF's overall liquidity is the volume of its
underlying holdings. Of the five of ACWN's top-10 holdings that
trade in the U.S., the one with lowest average daily volume is Bank
of Nova Scotia (NYSE:
BNS
) with average daily turnover of almost 383,000 shares.
AXFN also features an almost seven percent weight to Chinese
banks, many of the same that are found in the iShares FTSE China 25
Index Fund (NYSE:
FXI
), an ETF that has never been assailed for lack of liquidity.
Additionally, nearly all of AXFN's holdings that do not trade in
the U.S. are heavily traded in their home markets, so investors are
not getting involved with a slew of obscure, thinly traded names
with this fund.
The bottom line with AXFN is two-fold. First, the slack volume
and low AUM is clearly keeping investors at bay and a derivative of
that is a bid/ask spread that can often be wider than most folks
will want to be involved with. However, and this is the second
point, if bank stocks offer a 2012 sequel in 2013, AXFN could
easily be a bank ETF leader. It is just a matter of how many
investors actually realize it.
For more on
ETFs
, click
here
.
(c) 2012 Benzinga.com. Benzinga does not provide investment advice.
All rights reserved.
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