When you’re around something enough to become intimately familiar with it, it’s easy to forget just how valuable and exciting it can be. Such is the case with the financial industry. When investors are knee-deep in hunting for value, it can be easy to forget that value exists within the very channels we’re hunting through.
Today, I want to highlight a fund that brings that oft-overlooked value to the surface: the iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI). Established in 2006, IAI tracks a market-cap-weighted index of investment service providers, as well as securities and commodities exchanges.
It delivers a tight focus on one subset of the financial industry, only capturing U.S. broker-dealers and trading firms while excluding sectors such as banks, investment management firms and other financial institutions. While its selection universe is small, the fund avoids fancy methodology and weights its portfolio by market-cap.
Over half of IAI’s assets are among its top holdings. The fund uses a sampling method and caps each company to 22.5%, while the aggregate weight of companies with greater than 4.5% are capped at 45% of the fund’s value. The fund undergoes quarterly rebalancing.
IAI has assets under management of $1.51 billion and an expense ratio of 0.38%. It is currently up 11.97% over the past month, but is down 3.93% over the past three months and 0.78% year to date. However, it is also up a tremendous 29.19% over a one-year period.
IAI’s top holdings include Goldman Sachs Group, Inc. (NYSE: GS), 18.76%; Morgan Stanley (NYSE: MS), 15.27%; Charles Schwab Corp (NYSE: SCHW), 10.11%; Robinhood Markets, Inc. Class A (NASDAQ: HOOD), 4.46%; Moody’s Corporation (NYSE: MCO), 4.32%; S&P Global, Inc. (NYSE: SPGI), 4.26%; MSCI Inc. Class A (NYSE: MSCI), 4.18%; Intercontinental Exchange, Inc. (NYSE: ICE), 4.17%; Coinbase Global, Inc. Class A (NASDAQ: COIN), 4.14% and Nasdaq, Inc. (NASDAQ: NDAQ), 3.91%.
Chart from Stockcharts.com.
While there’s value to be found in the places we seek value, it may not be the right place for you to start digging. Investors should always do their due diligence before adding any stock, fund or ETF to their respective portfolios.
As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.
