This new, concentrated ETF lets investors bet on only the biggest U.S. banks

Published Tue, Mar 21 20239:38 AM EDTUpdated Tue, Mar 21 20231:46 PM EDT

Jesse Pound @/in/jesse-pound @jesserpound

A new ETF hitting the market this week is aimed at making it easier for investors to gain exposure to large banks, and large banks only. Roundhill Investments' Big Bank ETF (BIGB) will have equal weight positions in just six banks: Bank of America , Citigroup , Goldman Sachs , JPMorgan Chase , Morgan Stanley and Wells Fargo . The fund has an expense ratio of 0.29% and launches Tuesday. The Financial Select SPDR Fund (XLF) , by comparison, has more than 60 holdings, including regional banks and other financial firms, such as Berkshire Hathaway , which is its largest holding. "I'm not here to make an opinion about whether you should own Berkshire or not, but if you are buying financials is that really the name you want, or do you really just want the big banks? And that's really the idea here," said Dave Mazza, chief strategy officer at Roundhill Investments. The launch of the fund comes after a sharp divergence between the stock performances of different sizes of banks. Larger banks have outperformed regional banks in recent weeks, with the collapse of Silicon Valley Bank and Signature Bank leading to worries about similar institutions, such as First Republic and Western Alliance, while the largest and most heavily regulated banks are seen as relative safe havens. The fund's smaller group of holdings does make it more susceptible to bad news from one individual bank weighing down the fund. The new fund could also underperform in the short term if the financial system stabilizes and regional bank stocks enjoy a rebound. The new fund is one of several "big" sector funds on deck for Roundhill. The firm also has versions for airlines, defense and technology in the pipeline. Another wrinkle for the funds is they will primarily hold swaps and forwards on the underlying stocks instead of the stocks themselves, which Mazza said is to increase the diversification profile of the products. Roundhill is a small player in the ETF space, with a lineup of thematic funds. Its biggest success by assets is the Roundhill Ball Metaverse ETF (METV) , with more than $400 million in assets.