Looking for broad exposure to the financial-insurance segment of the equity market? You should consider the iShares US Insurance ETF (IAK), a passively managed exchange-traded fund launched on 05/01/2006.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility and tax efficiency; they are also excellent vehicles for long-term investors.
Sector ETFs are also convenient funds, offering many ways to gain low-risk and diversified exposure to a broad group of companies in specific sectors. Financials – Insurance is one of 16 broad Zacks sectors in the Zacks Industry Classification. It is currently ranked 12th, which puts it in the bottom 25%.
The fund is sponsored by Blackrock. It has accumulated over $360.69 million in assets, making it one of the mid-sized ETFs that tries to match the performance of the financial-insurance segment of the equity market. IAK seeks to match the performance of the Dow Jones US Select Insurance Index before fees and expenses.
The Dow Jones US Select Insurance Index includes companies that provide a range of specialized financial services, including securities brokers and dealers, online brokers and securities or commodity exchanges.
When looking at overall ETF returns, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts over the long term, all other things being equal.
Annual operating expenses for this ETF are 0.40%, which puts it on par with most similar products in the space.
It has a trailing 12-month dividend yield of 1.63%.
Sector exposure and largest holdings
It’s important to delve into ETF holdings before investing, despite the many advantages of these types of funds, such as diversified exposure that minimizes the risk of individual stocks. And most ETFs are very transparent products that disclose their holdings daily.
This ETF has the largest allocation in the financial sector – about 100% of the portfolio.
Looking at individual holdings, Chubb Ltd ( CB ) accounts for about 12.92% of total assets, followed by Progressive Corp ( PGR ) and American International Group Inc ( AIG ).
The top 10 holdings account for about 65.64% of total assets under management.
Performance and risk
The ETF has returned roughly 2.29% so far this year and is up about 12.84% over the past one year (as of 10/23/2023). During this last 52-week period, it has traded between $81.37 and $96.84.
The ETF has a beta of 0.82 and a standard deviation of 19.90% over the past three-year period, making it a medium-risk pick in the space. With around 60 holdings, it effectively diversifies company-specific risk.
The iShares US Insurance ETF holds a Zacks ETF Rank of 4 (Sell), which is based on the asset class’ expected return, expense ratio and momentum, among other factors. Therefore, IAK is not a great choice for investors looking for exposure to the financial ETF segment of the market. However, there are better ETFs in the space to consider.
The Invesco KBW Property & Casualty Insurance ETF (KBWP) tracks the KBW Nasdaq Property & Casualty Index, and the SPDR S&P Insurance ETF (KIE) tracks the S&P Insurance Select Industry Index. Invesco KBW Property & Casualty Insurance ETF has $151.99 million in assets, SPDR S&P Insurance ETF has $621.52 million. KBWP has an expense ratio of 0.35% and KIE charges 0.35%.
To learn more about this product and other ETFs, browse products that fit your investment goals, and read articles about the latest developments in the ETF investment universe, please visit the Zacks ETF Center.
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iShares US Insurance ETF (IAK): ETF Research Reports
American International Group, Inc. (AIG): Free Stock Analysis Report
Chubb Limited (CB) : Free Stock Analysis Report
The Progressive Corporation (PGR) : Free Stock Analysis Report
SPDR S&P Insurance ETF (KIE): ETF Research Reports
Invesco KBW Property & Casualty Insurance ETF (KBWP): ETF Research Reports
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Zacks Investment Research
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.