February 11, 2011

ETF Sector Focus: Broker-Dealer, Financial Services ETFs

U.S.-themed ETFs are tracking the markets, but global-financial ETF returns are mixed

This week on ETF Sector Focus, we look at those funds that invest in the wirehouses and other broker-dealers, and in the overall financial services industry.

The iShares Dow Jones U.S. Broker-Dealers ETF (IAI) has been lagging the major markets slightly over the past 12 months, with a 12-month return of about 18%.  But year to date, it is pulling ahead of the overall markets with 6% returns.

Its major holdings include Goldman Sachs, Morgan Stanley, Charles Schwab, NYSE Euronext (now in merger talks) and Ameriprise Financial.

Over the past 12 months, the Vanguard Financials ETF (VFH) has moved up roughly 22%.  This puts it ahead of the Dow Jones, in line with the S&P 500 but behind the Nasdaq (which is up more than 27% over the last year).

VFH’s major holdings are JPMorgan, Bank of America, Wells Fargo, Goldman Sachs and Morgan Stanley.  Year to date, it is up roughly 5%, which puts its performance in line with most major stock markets, except for the Dow Jones, now up about 5.5% in 2011.

VFH’s composition is quite similar to that of the iShares Dow Jones U.S. Financial Sector (IYF). VFH had a slightly better 12-year performance, but IYF is now tracking the Vanguard ETF very closely in year-to-date results.

And the Financial Select Sector SPDR (XLF) shares a similar portfolio, though one of its top-five holdings include Berkshire Hathaway and Citigroup.

The PowerShares Dynamic Financials (PFI) has a broader focus. Its major components are Principal Financial, Capital one, Prudential Financial, US Bancorp, PNC Financial, Ameriprise and T. Rowe Price.

PFI has a strong 12-month improvement of about 23%. But it’s up only 4.5% in 2011, putting it behind IAI and VFH so far this year.

Emerging-market financial ETFs are having a tougher time. The EGShares Emerging Markets Financials (EFN) is down more than 12.5% in 2011, after rising about 10% over the past 12 months. It includes many Brazilian and Chinese banks and insurance.

The SPDR S&P International Financial Sector ETF (IPF), however, with top-10 holdings in Australia, Hong Kong, Spain and France, is up a strong 9% in 2011 – putting it ahead of the U.S. markets. 

For the past 12 months, though, IPF has trailed the Dow and S&P, with returns of roughly 15%.

Reprints Discuss this story
This is where the comments go.