Making its debut on 11/08/2005, smart beta exchange traded fund State Street SPDR S&P Capital Markets ETF (KCE) provides investors broad exposure to the Financials ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Managed by State Street Investment Management, KCE has amassed assets over $475.66 million, making it one of the average sized ETFs in the Financials ETFs. Before fees and expenses, this particular fund seeks to match the performance of the S&P Capital Markets Select Industry Index.
The S&P Capital Markets Select Industry Index represents the capital markets segment of the S&P Total Market Index.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for KCE are 0.35%, which makes it one of the least expensive products in the space.
KCE's 12-month trailing dividend yield is 1.61%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For KCE, it has heaviest allocation in the Financials sector --about 99.1% of the portfolio.
When you look at individual holdings, Robinhood Markets Inc A (HOOD) accounts for about 1.98% of the fund's total assets, followed by Donnelley Financial Solution (DFIN) and Virtus Investment Partners (VRTS).
KCE's top 10 holdings account for about 17.69% of its total assets under management.
Performance and Risk
The ETF has added roughly 11.61% so far this year and it's up approximately 9.47% in the last one year (as of 08/19/2026). In the past 52-week period, it has traded between $132.62 and $169.71
KCE has a beta of 1.22 and standard deviation of 21.21% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 67 holdings, it effectively diversifies company-specific risk .
Alternatives
State Street SPDR S&P Capital Markets ETF is a reasonable option for investors seeking to outperform the Financials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
iShares U.S. Broker-Dealers & Securities Exchanges ETF(IAI) tracks Dow Jones U.S. Select Investment Services Index The fund has $1.38 billion in assets. IAI has an expense ratio of 0.38%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Financials ETFs
Bottom Line
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.
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State Street SPDR S&P Capital Markets ETF (KCE): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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