ETFs With Significant Goldman Sachs Exposure

by on April 16, 2010 | ETFs Mentioned:

After generally impressive earnings reports sent markets higher for much of the last week, Friday’s shocking allegations against Goldman Sachs ensured that the week ended on a down note. The SEC filed fraud charges against the Wall Street giant on Friday, alleging that the firm failed to make important disclosures surrounding a subprime mortgage product some believe was destined to fail. The SEC claims that Goldman constructed and marketed ABACUS, a synthetic collateralized debt obligation linked to the performance of subprime MBS. Goldman didn’t make certain “vital information” known to investors. Specifically, the hedge fund run by John Paulson was involved in selecting which securities would be part of the portfolio, while standing to reap a huge profit if the mortgage-backed securities failed.

Financial ETFs Sink

The news sent Goldman stock plummeting, as GS finished Friday off more than 12% on volume nearly ten times the daily average. But once again turmoil at one Wall Street firm rippled throughout the financial sector and broader markets. Some analysts noted that the timing of the charges could help politicians to push a regulatory overhaul through Congress. “Many are openly questioning the timing of the announcement,” writes Bob Pisani. “Why? Because a vote on financial reform is imminent…and victory is not assured.”

The development at Goldman highlights a lesser-known benefits of ETFs compared to actively-managed mutual funds. ETFs are required to post their holdings on their Web site on a daily basis, while many mutual funds only reveal holdings data on a quarterly basis. So ETF investors concerned about exposure to Goldman through financial ETFs are able to quickly and easily compute the potential impact on their portfolios, while mutual fund investors face a less transparent structure.

Below, we profile U.S.-listed ETFs with significant exposure to Goldman Sachs (note that all weights are as of April 15, before Friday’s price decline). See a list of all ETFs in the Financials Equities ETFdb Category here.

ETFs With Goldman Sachs Exposure
Ticker ETF GS Weight
IAI U.S. Broker-Dealers Index Fund 11.05%
KCE SPDR KBW Capital Markets 8.05%
IYG Dow Jones U.S. Financial Services Index Fund 5.31%
EXB Claymore/Clear Global Exchanges Brokers and Asset Managers 5.28%
XLF SPDR Select Sector Fund 5.22%
VFH Vanguard Financials ETF 4.00%
RFF RP Financials ETF 3.67%
IYF U.S. Financial Sector Index Fund 3.55%
RWW RevenueShares Financials Sector 3.51%
PFI PowerShares Dynamic Financial Portfolio 2.59%
IXG iShares S&P Global Financial Index Fund 1.91%

Jared Cummans contributed to this article.

Disclosure: No positions at time of writing.