U.S. Bank ETFs Battle for Inflows: National (KBE) Vs. Regional (KRE)

by on May 30, 2013 | ETFs Mentioned:

The financial sector has seen more than its fair share of ups and downs, but the enduring volatility of this sector has done little to diminish its appeal to investors. While those with a long-term focus may have avoided financials, the increased volatility has attracted more active investors who are counting on strong movements in these funds. While there are many Financial Equity ETFs, there are two particularly interesting funds that are worth digging into: SPDR S&P Bank ETF (KBE, A) and SPDR S&P Regional Banking ETF  (KRE, A-) [Download How To Pick The Right ETF Every Time].

Meet the Competitors

Many banks, including Wells Fargo, saw their shares spike in Friday tradingBoth KBE and KRE are State Street funds and have about seven years of market experience behind them. Holding $2.16 billion and $1.55 billion in total assets under management, respectively, both funds have the extremely low expense ratio of 35 basis points, but both also have relatively high 200 day volatility at about 14.70%. What seperates these funds is their indexes; KBE consists of banks that operate all over U.S. such as PNC, Fifth Third and Wells Fargo, while KRE focuses on the generally smaller banks that operate regionally. There is still some crossover between funds, but generally the funds in KRE are not names found all over the U.S. [also see Are Big Banks In Trouble: Three ETFs To Watch].

While both funds saw inflows in their early years, in the years following the financial crash investors spent four years zigzagging between strong stakes in KBE to dropping it from their portfolios. KRE was all but forgotten until 2012, and since then both funds have seen minimal investing. The returns for both KBE and KRE have also jumped crippling losses to more see great gains  [try our Free ETF Head-To-Head Comparison Tool].

The Bottom Line

Given that the financial crisis seized the returns of almost all financial ETFs in 2008, both of these funds have been able to pull through the last five years with investors and some funds still intact. Both have even had positive returns for the last 18 months, which analysts point to as another sign of American economic recovery. They may never see the monumental inflows or returns from before the crash, but these national and regional banking ETFs have proven they can weather a storm.

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Disclosure: No positions at time of writing.