ETF spotlight on iShares Dow Jones US Broker-Dealers (NYSEARCA:IAI), part of an ongoing series.
Assets: $57.8 million.
Objective: The iShares Dow Jones U.S. Broker-Dealers Index Fund tries to reflect the performance of the Dow Jones U.S. Select Investment Services Index, which includes companies from the investment services sector, such as financial services, brokers/dealers, online brokers and securities or commodities exchanges.
Holdings: Top holdings include: Goldman Sachs Group (NYSE: GS) 8.4%, Morgan Stanley (NYSE: MS), Ameriprise Financial (NYSE: AMP) 6.4%, Charles Schwab Group (NYSE: SCHW) and CME Group (NasdaqGS: CME) 5.9%.
What You Should Know:
- iShares, the ETF side of BlackRock, sponsors the fund.
- IAI has an expense ratio of 0.47%.
- The fund has 25 holdings.
- The ETF is up 11.4% over the past month, 8.1% higher over the past three months but down 21.01% over the past year.
- “Would-be investors should note that the performance of these firms is highly dependant on (and correlated with) the health of the broader capital markets,” according to Morningstar analyst Timothy Strauts. “Over the past three years IAI has sported 91% correlation with the S&P 500 Index.”
- “The European debt crisis is a concern for the entire financial system,” Strauts added. But, “many of the firms in this ETF’s portfolio also rely heavily on fees tied to assets under management. Thus, in rising markets, asset-based revenues tend to bolster performance.”
The Latest News:
- “The advisory industry as a whole continues to rebound, but the four wirehouses (Merrill Lynch, Morgan Stanley Smith Barney, UBS AG and Wells Fargo) are not rebounding,” Bing Waldert, director at Cerulli Associates, said in an InvestmentNews article. “The years since 2007 represent a worst-case scenario for the wirehouses, as these firms were punished by the bear market and their perceived role in the financial crisis.”
- Waldert points out that advisors are leaving for other distribution channels, with broker-dealers and RIAs becoming the fastest growth areas of the market.
- Tim Oden, senior managing director of business development at Schwab Adviosr Services, believes more brokers will shift to independent RIA channels this year, reports Dan Jamieson for InvestmentNews.
- A recent Cerulli Associates report estimated that wirehouses’ market share will diminish to 35% in 2013 from 43% last year.
iShares Dow Jones US Broker-Dealers
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Max Chen contributed to this article.