ETFs such as Financial Select Sector SPDR (NYSEArca: XLF) and iShares U.S. Financials (NYSEArca: IYF) tracking the largest financial companies tend to dominate the sector in terms of trading volume and assets.

However, the relatively small and often-overlooked SPDR S&P Capital Markets (NYSEArca: KCE) has posted solid performance this year thanks to positions in discount brokers and asset managers.

For example, Bloomberg reports that shares of discount brokers are gaining the most since 2003 versus the S&P 500 as more individual investors join the rally in U.S. stocks.

Charles Schwab (NYSE: SCHW), E-Trade (NasdaqGS: ETFC) and TD Ameritrade (NYSE: AMTD) are beating most large-cap financial stocks this year.

When this happens, investors tend to move into equity mutual funds, which have suffered outflows after the financial crisis, according to Bloomberg. The three stocks are among the largest positions in KCE, which holds $73 million of assets.

“It says something about an improvement of confidence among our biggest sector of the economy, retail investors and households,” said James Paulsen, chief investment strategist at Wells Capital Management, in the article. “When the retail investor finally gets more confident about the future, flows follow.”

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