KBW Jumps to PowerShares, New Funds Charge 0%

It appears the reason that State Street Global Advisors isn’t using financial indices from investment bank Keefe Brunette & Woods is because KBW jumped ship to Invesco PowerShares.

The same day State Street changed five of its financial ETFs from KBW indices to benchmarks from Standard & Poor’s, PowerShares began trading ETFs that tracked four of the same KBW Indices.

And in a stunning move to grab investors away from State Street, PowerShares said it would wave it’s unitary fee of 0.35% until February 1, 2012. The unitary fee is the management fee portion of the expense ratio. And since the entire expense ratio for these funds goes to the manager, the effective expense ratio for these funds is 0% until

Apparently, KBW’s license with State Street was expiring and coming up for renewal. Meanwhile, KBW had also licensed some indices to PowerShares for ETFs. KBW is also currently working with Invesco on some global initiatives and was happy with the service they had received from Powershares on the ETFs. So, KBW decided this was a good time to consolidate with one ETF provider and chose Powershares.

The new ETFS:
PowerShares KBW Bank Portfolio (KBWB)
PowerShares KBW Capital Markets Portfolio (KBWC)
PowerShares KBW Insurance Portfolio (KBWI)
PowerShares KBW Regional Banking Portfolio (KBWR)

Each ETF tracks the KBW index of the same name. The only KBW index that had been used for a SPDR ETF, but hadn’t moved to PowerShares was the KBW Mortgage Finance Index.

KBW is a well-known provider of research on the financial services sector and KBW indexes are widely used by industry professionals as performance benchmarks.


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