Launched on 06/19/2006, the SPDR S&P Regional Banking ETF (KRE) is a smart beta exchange traded fund offering broad exposure to the Financials ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is sponsored by State Street Global Advisors. It has amassed assets over $3.24 billion, making it one of the larger ETFs in the Financials ETFs. This particular fund, before fees and expenses, seeks to match the performance of the S&P Regional Banks Select Industry Index.
The S&P Regional Banks Select Industry Index represents the regional banks 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.
Operating expenses on an annual basis are 0.35% for this ETF, which makes it one of the least expensive products in the space.
It's 12-month trailing dividend yield comes in at 2.77%.
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.
For KRE, it has heaviest allocation in the Financials sector --about 100% of the portfolio.
Taking into account individual holdings, Huntington Bancshares Inc (HBAN) accounts for about 3% of the fund's total assets, followed by East West Bancorp Inc (EWBC) and M + T Bank Corp (MTB).
The top 10 holdings account for about 28.14% of total assets under management.
Performance and Risk
The ETF has lost about -5.92% so far this year and is up about 18.49% in the last one year (as of 05/27/2025). In the past 52-week period, it has traded between $46.12 and $68.90.
The fund has a beta of 0.87 and standard deviation of 31.92% for the trailing three-year period, which makes KRE a high risk choice in this particular space. With about 142 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Regional Banking 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.
Invesco KBW Regional Banking ETF (KBWR) tracks KBW Nasdaq Regional Banking Index and the iShares U.S. Regional Banks ETF (IAT) tracks Dow Jones U.S. Select Regional Banks Index. Invesco KBW Regional Banking ETF has $47.26 million in assets, iShares U.S. Regional Banks ETF has $604.61 million. KBWR has an expense ratio of 0.35% and IAT charges 0.40%.
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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SPDR S&P Regional Banking ETF (KRE): ETF Research Reports M&T Bank Corporation (MTB): Free Stock Analysis Report Huntington Bancshares Incorporated (HBAN): Free Stock Analysis Report East West Bancorp, Inc. (EWBC): Free Stock Analysis Report iShares U.S. Regional Banks ETF (IAT): ETF Research Reports Invesco KBW Regional Banking ETF (KBWR): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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