Financials ETFs In Flux

October 15, 2019

Bank ETFs Returns & Assets Fall

Regional banks typically don’t have international exposure, so in theory they should withstand a trade war better than bigger banks and financial institutions. But they are very rate sensitive, because they don’t typically have diversified sources of income.

In the ETF space, investors have largely shunned regional bank ETFs so far this year, some of which have lost about half their total assets in 2019.

The SPDR S&P Regional Banking ETF (KRE), the biggest regional banking and fourth largest financials ETF, with $1.6 billion in assets, has lost $1.5 billion in net redemptions this year. The SPDR S&P Bank ETF (KBE) has bled $1.3 billion. The iShares U.S. Regional Banks ETF (IAT) is down about $250 million. The list goes on, even though they are all delivering positive—albeit underperforming—results.



Mortgage, Insurance ETFs Gain

Beating the outflows trend in financials this year, however, are ETFs that focus exclusively on insurance companies and mortgages.

Net asset creations are very modest year to date, but they aren’t negative. It’s been a strong year for insurance companies, and ETFs focused on these stocks, such as the SPDR S&P Insurance ETF (KIE) and the Invesco KBW Property & Casualty Insurance ETF (KBWP), are up sharply.


Mortgage & Insurance ETFs Top Gainers YTD

Ticker Fund YTD 2019 Net Flows ($M) 2019 AUM ($M)
KIE SPDR S&P Insurance ETF 88.28 877.37
REM iShares Mortgage Real Estate ETF 72.40 1,254.82
MORT VanEck Vectors Mortgage REIT Income ETF 46.03 191.48
KBWP Invesco KBW Property & Casualty Insurance ETF 42.26 113.51


For mortgage generators, loan volume is expected to increase as rates drop. A 30-year fixed rate mortgage now averages 3.5%, down from 4.9% a year ago, MarketWatch reported. According to the report, while lower rates have boosted demand for loan refinancing—up some 160% year on year—more than for new mortgages, the numbers are trending higher, data from Mortgage Bankers Association shows.


YTD Performance Relative To XLF

Charts courtesy of


With earnings season upon us, a lot of attention will fall on many of these companies, as the market looks for a catalyst to push financials (XLF) back toward the sector’s 2018 highs—a resistance level the market has yet to breach this year.

Contact Cinthia Murphy at [email protected]

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