Designed to provide broad exposure to the Financials - Brokers/ Capital markets segment of the equity market, the iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI) is a passively managed exchange traded fund launched on 05/01/2006.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Financials - Brokers/ Capital markets is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 7, placing it in top 44%.
The fund is sponsored by Blackrock. It has amassed assets over $218.79 M, making it one of the average sized ETFs attempting to match the performance of the Financials - Brokers/ Capital markets segment of the equity market. IAI seeks to match the performance of the Dow Jones U.S. Select Investment Services Index before fees and expenses.
The Dow Jones U.S. Select Investment Services Index measures the performance of the investment services sector of the U.S. equity market.
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.43%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.60%.
Sector Exposure and Top Holdings
ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Financials sector--about 100% of the portfolio.
Looking at individual holdings, Cme Group Inc Class A (CME) accounts for about 11.15% of total assets, followed by Intercontinental Exchange Inc (ICE) and Goldman Sachs Group Inc (GS).
The top 10 holdings account for about 67.46% of total assets under management.
Performance and Risk
Year-to-date, the iShares U.S. Broker-Dealers & Securities Exchanges ETF has lost about -10.34% so far, and is down about -10.42% over the last 12 months (as of 12/28/2018). IAI has traded between $52.67 and $70.28 in this past 52-week period.
The ETF has a beta of 1.08 and standard deviation of 18.62% for the trailing three-year period, making it a high risk choice in the space. With about 29 holdings, it has more concentrated exposure than peers.
IShares U.S. Broker-Dealers & Securities Exchanges ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, IAI is a reasonable option for those seeking exposure to the Financials ETFs area of the market. Investors might also want to consider some other ETF options in the space.
SPDR S&P Capital Markets ETF (KCE) tracks S&P Capital Markets Select Industry Index. The fund has $41.94 M in assets. KCE has an expense ratio of 0.35%.
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 .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.