A smart beta exchange traded fund, the SPDR S&P Insurance ETF (KIE) debuted on 11/08/2005, and offers broad exposure to the Financials ETFs category of the market.
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Because the fund has amassed over $849.53 million, this makes it one of the average sized ETFs in the Financials ETFs. KIE is managed by State Street Investment Management. KIE seeks to match the performance of the S&P Insurance Select Industry Index before fees and expenses.
The S&P Insurance Select Industry Index represents the insurance segment of the S&P Total Market Index.
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.35% for KIE, making it one of the least expensive products in the space.
It's 12-month trailing dividend yield comes in at 1.65%.
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 100% of the portfolio, the fund has heaviest allocation to the Financials sector.
Looking at individual holdings, Genworth Financial Inc (GNW) accounts for about 2.03% of total assets, followed by Oscar Health Inc Class A (OSCR) and Kinsale Capital Group Inc (KNSL).
The top 10 holdings account for about 19.98% of total assets under management.
The ETF has added about 0.21% and was up about 5.11% so far this year and in the past one year (as of 07/31/2025), respectively. KIE has traded between $51.62 and $62.03 during this last 52-week period.
The ETF has a beta of 0.75 and standard deviation of 18.03% for the trailing three-year period, making it a medium risk choice in the space. With about 55 holdings, it effectively diversifies company-specific risk .
SPDR S&P Insurance 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.
Invesco KBW Property & Casualty Insurance ETF (KBWP) tracks KBW Nasdaq Property & Casualty Index and the iShares U.S. Insurance ETF (IAK) tracks Dow Jones U.S. Select Insurance Index. Invesco KBW Property & Casualty Insurance ETF has $455.35 million in assets, iShares U.S. Insurance ETF has $723.93 million. KBWP has an expense ratio of 0.35% and IAK changes 0.39%.
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
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This article originally published on Zacks Investment Research (zacks.com).
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