Launched on 11/08/2005, the State Street SPDR S&P Bank ETF (KBE) is a smart beta exchange traded fund offering broad exposure to the Financials ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by State Street Investment Management, and has been able to amass over $1.38 billion, which makes it one of the larger ETFs in the Financials ETFs. Before fees and expenses, KBE seeks to match the performance of the S&P Banks Select Industry Index.
The S&P Banks Select Industry Index is a modified equal-weighted index that seeks to reflect the performance of publicly traded companies that do business as banks or thrifts. The Bank Index is currently comprised of common stocks of national money centers and leading regional banks or thrifts listed on the NYSE or another U.S. national securities exchange, or NASDAQ/National Market System.
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 KBE are 0.35%, which makes it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 2.54%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Representing 100% of the portfolio, the fund has heaviest allocation to the Financials sector.
Looking at individual holdings, Comerica Inc (CMA) accounts for about 1.22% of total assets, followed by Eastern Bankshares Inc (EBC) and Fb Financial Corp (FBK).
KBE's top 10 holdings account for about 11.19% of its total assets under management.
Performance and Risk
So far this year, KBE has added roughly 5.04%, and is up roughly 7.19% in the last one year (as of 11/06/2025). During this past 52-week period, the fund has traded between $45.85 and $62.76.
The fund has a beta of 1.02 and standard deviation of 28.16% for the trailing three-year period, which makes KBE a high risk choice in this particular space. With about 104 holdings, it effectively diversifies company-specific risk .
Alternatives
State Street SPDR S&P Bank ETF is an excellent option for investors seeking to outperform the Financials ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
First Trust NASDAQ Bank ETF (FTXO) tracks Nasdaq US Smart Banks Index and the Invesco KBW Bank ETF (KBWB) tracks KBW Nasdaq Bank index. First Trust NASDAQ Bank ETF has $240.53 million in assets, Invesco KBW Bank ETF has $5.69 billion. FTXO has an expense ratio of 0.60% and KBWB changes 0.35%.
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 Bank ETF (KBE): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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