This ETF offers exposure to regional banks, delivering targeted exposure to a unique corner of the U.S. financials sector. Given the narrow focus of KBWR, this fund might be most useful for investors looking to implement a shorter term tactical tilt towards this corner of the market, though it can certainly also be used as a component of a long-term portfolio as well.
KBWR’s portfolio is unique from the most popular ETFs in the Financials Equities ETFdb Category; this ETF is designed to focus on firms that do business as regional banks or thrifts, and as such does not include Wall Street titans that make up funds such as XLF. Moreover, it should be noted that these smaller regional banks often maintain risk/return profiles that differ considerably from their large cap peers; though impacted by some of the same factors, regional banks generally depend more heavily on traditional banking functions to drive profits.
KBWR’s portfolio is reasonably deep, consisting of about 50 individual holdings. And this ETF features a nice degree of balance as well; no one name accounts for a huge portion of assets. For investors looking to target this corner of the market, the competitive expense ratio and balanced portfolio make KBWR a potentially appealing option. Alternative ETPs covering the same corner of the market include KRE (which is linked to an equal-weighted index) and IAT, while ProShares offers a pair of leveraged ETFs targeting regional banks (KRS, KRU).