The fund tracks a capped index that selects financial sector companies from the Russell 1000 and applies a ceiling to individual stock weightings to meet regulatory requirements. It bundles banks, insurers, card companies, exchanges and asset managers into a single product.

It suits investors who want diversified exposure across the U.S. financial sector and plan to adjust their sector weighting in light of the interest rate cycle and regulatory trends.

It is a passively managed (index-tracking) ETF run by BlackRock iShares.

The fund selects financial sector companies within the Russell 1000 and holds them on a market-cap-weighted basis, while capping individual stock weightings to satisfy diversification rules. Because it includes insurers, card companies, exchanges and asset managers in addition to banks, its industry mix is broader than that of bank-only ETFs.

• Broad financial coverage that goes beyond banks to include insurance, card companies, exchanges and asset management
• A capped index that eases concentration in a handful of large financial stocks
• Part of the iShares sector lineup, which has a long track record

Assets under management (AUM) stand at $3.8B, and the total expense ratio is 0.37% per year.

Compared with lower-cost rival products that hold the same U.S. financial sector, the fee burden is heavier, so it is worth weighing the long-term holding cost first.

The fund has repeatedly shown a pattern of strength when expectations for banks' net interest margins rise during periods of climbing rates, and of steeper declines when credit concerns or real estate loan problems emerge. It tends to be more volatile than the broader market index.

Sector inflows and outflows tend to move quickly whenever the rate outlook shifts. Large-bank earnings seasons and discussions of regulation and capital requirements are key variables that steer fund flows.

Its strength lies in covering the entire U.S. financial industry in a single product, while its weaknesses are a higher expense ratio than comparable financial ETFs and exposure to the interest rate and credit cycles.

Among the products shown together in the table, competing ETFs that hold the U.S. financial sector carry a lower fee burden, while the others invest in different sectors, so it is better to use them only as a reference for differences in fees and fund size rather than comparing performance side by side. To narrow the scope within financials, consider XLF, which centers on large financial stocks, and KBE and KRE, which hold only the banking industry. If you want amplified directional exposure, leveraged products such as FAS are also an option.

Even when a U.S. financial sector ETF tracks an index, its performance can differ widely depending on the economy and interest rates. Before buying, please check four things in order: cost, industry mix, interest rate phase and exchange rate.

When sharp rate swings, rising loan losses and tighter capital regulation coincide, the entire sector comes under pressure at the same time. Because the fund tracks an index it is diversified, but the fact that it is single-industry exposure remains.

It is a reasonable choice when you want to hold the U.S. financial industry in a single product. If cost is your priority, compare it with a lower-cost financial sector ETF, and if you want to focus only on banks, compare it with KBE and KRE as well.