A smart beta exchange traded fund, the State Street SPDR S&P Capital Markets ETF (KCE) debuted on 11/08/2005, and offers 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.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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.
Fund Sponsor & Index
The fund is managed by State Street Investment Management. KCE has been able to amass assets over $529.81 million, making it one of the average sized ETFs in the Financials ETFs. KCE, before fees and expenses, 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
It's 12-month trailing dividend yield comes in at 1.62%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
KCE's heaviest allocation is in the Financials sector, which is about 100% of the portfolio.
Looking at individual holdings, Wisdomtree Inc (WT) accounts for about 1.75% of total assets, followed by Donnelley Financial Solution (DFIN) and Hamilton Lane Inc Class A (HLNE).
KCE's top 10 holdings account for about 17.17% of its total assets under management.
Performance and Risk
Year-to-date, the State Street SPDR S&P Capital Markets ETF has added about 0.68% so far, and it's up approximately 6.55% over the last 12 months (as of 02/05/2026). KCE has traded between $108.52 $161.48 in this past 52-week period.
KCE has a beta of 1.27 and standard deviation of 21.11% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 66 holdings, it effectively diversifies company-specific risk .
Alternatives
State Street SPDR S&P Capital Markets ETF is not a suitable option for investors seeking to outperform the Financials ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
iShares U.S. Broker-Dealers & Securities Exchanges ETF(IAI) tracks Dow Jones U.S. Select Investment Services Index The fund has $1.86 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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