ETFs with Goldman Exposure Take Big Hits

The SEC's filing against Goldman Sachs (GS) on April 16 reverberated across Wall Street, as several well-performing banking and diversified financial ETFs with GS exposure got hammered following the announcement. Although many ETFs in that sector had trended downward during the first half of 2010, a handful had bucked this trend, producing strong 52-week results.

Following are five top-performing funds with significant GS exposure and how they closed on April 16, according to ETF Database (etfdb.com). GS exposures are as of April 15, one day before the price decline.

• iShares Dow Jones U.S. Broker-Dealers Index (IAI): GS exposure, 11.1%; 52-week return, 26%; 4/16 close, -3.6%
• SPDR KBW Capital Markets ETF (KCE): GS exposure, 8.1%; 52-week return, 33.9%; 4/16 close, -3.3%
• iShares Dow Jones U.S. Financial Services Index Fund (IYG): GS exposure, 5.3%; 52-week return, 43.4%; 4/16 close, -4%
• Claymore/Clear Global Exchanges, Brokers and Asset ETF (EXB): GS exposure, 5.3%; 52-week return, 31.2%; 4/16 close, -2.5%
• SPDR Select Sector Fund (XLF): GS exposure, 5.2%; 52-week return, 47.3%; 4/16 close, -3.7%

According to ETF Database, the hits these funds sustained underscored one of the benefits for investors in ETFs compared with actively managed mutual funds. ETFs have to post their holdings on their Web sites daily, whereas many mutual funds do so only quarterly. As a result, investors in financial ETFs were able to quickly figure out what effect the GS news might have on their portfolios.

Michael S. Fischer (msf7@columbia.edu) is a New York-based financial writer and editor and a frequent contributor to Wealth Manager.