Market Overview

Investors Are Flocking To This Bank ETF

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Investors Are Flocking To This Bank ETF

Financial services stocks and exchange-traded funds have been favored destinations for investors since November's U.S. presidential election. While that theme has been benefiting some predictable ETFs tracking the sector, some more tactical, dedicated bank ETFs are drawing renewed interest as well.

Flocking To Financials

Enter the PowerShares KBW Bank Portfolio (NYSE: KBWB), which tracks the widely followed KBW Nasdaq Bank Index. So, when you hear that index referenced on CNBC or elsewhere in the financial media, you'll know that is accessible via KBWB.

As its name implies, KBWB is a pure bank ETF, meaning investors will not find exposure to insurance firms and capital markets companies as is the case with traditional, diversified financial services ETFs. KBWB does, however, feature some exposure to asset management firms, but those companies represent just three of the ETF's 24 holdings.

Searching For A Strategy Amid Looming Rate Hikes

With increasingly higher odds that interest rates are going to imminently rise, market participants have a somewhat clear playbook for the days ahead. Looking for the exchange-traded funds that merit attention and scrutiny in the weeks ahead is not difficult because many of the funds below are, for better or worse, highly sensitive to interest rates.

KBWB is adequately levered to that theme because nearly half of its lineup are pure play regional banks, a group positively correlated to rising interest rates. And that does not include KWBB's exposure to super regional names, such as US Bancorp (NYSE: USB) and BB&T Corporation(NYSE: BBT).

KBWB's lineup, though small relative to diversified financial services ETFs, is proving advantageous in the current market environment. Over the past year, KBWB is higher by 54 percent, outpacing the largest financial services ETF by more than 1,300 basis points over that stretch.

Since inception, KBWB has outpaced the S&P 500 Financials Index by about 500 basis points.

Investors are responding to KBWB as highlighted by inflows of nearly $151 million last week, good for the second-best total among all PowerShares ETFs, according to issuer data. That brought KBWB's year-to-date inflows to nearly $281 million, a total exceeded by just two other PowerShares ETFs.

Posted-In: Long Ideas Sector ETFs Politics Top Stories Federal Reserve Markets Trading Ideas ETFs Best of Benzinga

 

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