There have been some mild outflows in recent sessions in the largest “Regional Banking” ETF, KRE (SPDR S&P Regional Banking, Expense Ratio 0.35%, $3 billion in AUM), with approximately $275 million exiting the fund via redemption pressure.
This may be tied to the over $340 million that has vacated the largest U.S. Financial Equity ETF, XLF (SPDR Financial Select, Expense Ratio 0.14%), during this same timeframe, as it appears that portfolio managers are trimming exposure to the space — especially since XLF recently clipped and failed to hold its 50 day MA.
KRE remains the largest “Regional Banking” focused ETF in the landscape in spite of the recent outflows, and with its north of $3 billion in AUM it is nearly three times the size of its next largest rival in the segment, IAT (iShares U.S. Regional Banks, Expense Ratio 0.44%, $658 million in AUM), and the third largest fund in this camp has only $151 million in assets under management, KBWR (PowerShares KBW Regional Banking Portfolio, Expense Ratio 0.35%).
Recent volatility in this space amid the outflows does bring into consideration the trading oriented “Bear” products that track the Regional Banks, the lesser known WDRW (Direxion Daily Regional Banks Bear 3X, Expense Ratio 1.10%, $5 million in AUM) and KRS (ProShares Short KBW Regional Banking, Expense Ratio 0.95%, $1.7 million in AUM).
When breaking down the underlying portfolio in KRE, we see that there are one hundred four individual holdings, and the fund follows a modified equal-weighting scheme that is familiar to several other SPDR niche sector funds. Because of this, no individual holding takes up too much of the portfolio from a weighting standpoint unlike a market-capitalization weighted ETF such as say XLF, where the two largest names are BRK.B (11.26%) and JPM (10.71%).
Also, when we see flows into or out of KRE we typically think of them as a sector bet more so than anything company specific nor earning related, when on the other hand traders and portfolio managers will often use XLF and XLF options around the earnings reports of the major money center banks that populate the underlying index. The largest KRE holdings are as follows: 1) FITB (2.50%), 2) BBT (2.49%), 3) PNC (2.46%), 4) ZION (2.46%), 5) STI (2.36%).
The SPDR S&P Regional Banking ETF (NYSE:KRE) was trading at $51.89 per share on Tuesday morning, up $0.3 (+0.58%). Year-to-date, KRE has declined -6.00%, versus a 10.49% rise in the benchmark S&P 500 index during the same period.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.