The State Street SPDR S&P Capital Markets ETF (KCE) was launched on 11/08/2005, and is a smart beta exchange traded fund designed to offer broad exposure to the Financials ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $450 million, this makes it one of the average sized ETFs in the Financials ETFs. KCE is managed by State Street Investment Management. Before fees and expenses, KCE seeks to match the performance of the S&P Capital Markets Select Industry Index.
The S&P Capital Markets Select Industry Index represents the capital markets segment of the S&P Total Market Index.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for KCE are 0.35%, which makes it one of the least expensive products in the space.
It's 12-month trailing dividend yield comes in at 1.72%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 100% of the portfolio, the fund has heaviest allocation to the Financials sector.
Taking into account individual holdings, Wisdomtree Inc (WT) accounts for about 2.47% of the fund's total assets, followed by Cboe Global Markets Inc (CBOE) and Tradeweb Markets Inc Class A (TW).
The top 10 holdings account for about 20.24% of total assets under management.
Performance and Risk
The ETF return is roughly 0.28% so far this year and is up about 28.87% in the last one year (as of 04/15/2026). In the past 52-week period, it has traded between $113.73 and $161.48
KCE has a beta of 1.26 and standard deviation of 21.14% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 65 holdings, it effectively diversifies company-specific risk .
Alternatives
State Street SPDR S&P Capital Markets ETF is not a suitable option for investors seeking to outperform the Financials ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
iShares U.S. Broker-Dealers & Securities Exchanges ETF(IAI) tracks Dow Jones U.S. Select Investment Services Index The fund has $1.57 billion in assets. IAI has an expense ratio of 0.38%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Financials ETFs
Bottom Line
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State Street SPDR S&P Capital Markets ETF (KCE): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).