Buoyed by nearly $110 billion in global healthcare deals, mergers and acquisitions surged to an eight-year high of over $843 billion in the first quarter. That is up 23% from the year-earlier period.
Of course, that is good news for the investment banks that collect fees from increased deal-making. Earlier this year, Goldman Sachs (NYSE: GS) said its investment banking backlog was at an eight-year high, indicating that 2015 could prove to be a good year for the financial services sector and the corresponding exchange traded funds.
“Meanwhile, asset management companies are doing well, with fees collected having doubled in the five0year five-year period ending 2014. AUM fees benefited from a rising equity market and a positive trend in AUM net inflows. Equity funds have been the biggest winners since the financial crisis, moving from 37% of total assets under management (AUM) in 2009 to 54% in 2014, benefiting from both a rising equity market and higher net inflows, which are likely to continue in 2015,” said S&P Capital IQ in a new research note.
The SPDR S&P Capital Markets ETF (NYSEArca: KCE) is an example of an ETF that is benefiting from increased demand for investment banking services. Over the past month, KCE is up nearly 2.1%, outperforming the Financial Select Sector SPDR (NYSEArca: XLF) by 30 basis points over that period. [Inside a Capital Markets ETF]
While Lazard (NYSE: LAZ) and Goldman Sachs are top 10 holdings in KCE, the ETF is also a play on another important theme: The exponential growth of the ETF industry. KCE’s top 10 holdings include State Street (NYSE: STT) and WisdomTree (NasdaqGS: WETF), the third- and fifth-largest U.S. ETF sponsors, respectively.
KCE is home to other ETF giants as well, including BlackRock (NYSE: BLK), Invesco (NYSE: IVZ); the parent company of PowerShares, NorthernTrust (NasdaqGS: NTRS); parent of FlexShares and Charles Scwhab (NYSE: SCHW).
Combined assets under management for global exchange traded products hit $2.92 trillion at the end of the first quarter, including $2.09 trillion in the U.S., according to ETF research firm ETFGI. [Global ETF/ETP Assets hit a Record in Q1]
“Investors increasingly are using ETFs to gain exposure to industries, execute intraday trades, and benefit from ETFs’ low-cost and passive nature,” said S&P Capital IQ.
The research firm has an overweight rating on the $176.9 million KCE and three-star ratings on BlackRock and Goldman Sachs.
SPDR S&P Capital Markets ETF