ETF Trends
ETF Trends

As we adjust portfolios in anticipation of higher interest rates ahead, investors may consider including exchange traded funds that track insurance companies.

For instance, investors can use the SPDR S&P Insurance ETF (NYSEArca: KIE), iShares US Insurance ETF (NYSEArca: IAK), PowerShares KBW Property & Casualty Insurance Portfolio (NYSEArca: KBWP) and PowerShares KBW Insurance Portfolio (NYSEArca: KBWI) to capture broad exposure to insurance providers as interest rates rise. [Another Rising Rates ETF Breaks Out]

“Like the broader financials sector, the insurance industry appears attractive,” State Street Global Advisors Vice President and Head of Research Dave Mazza told TheStreet. “If investors believe that long-term interest rates will move higher along with a steepening yield curve, this will be a further boost to insurance stocks. While a steepening yield curve is not our base case, a rate move in 2015 is.”

For instance, yields on benchmark 10-year Treasuries have inched up 18 basis points to 2.35% so far this year. Meanwhile, KIE has increased 6.7%, IAK rose 6.0%, KBWP jumped 10.3% and KBWI advanced 5.0% so far this year.

Moreover, since the insurance industry largely targets the domestic economy, a strengthening U.S. dollar will have a lower impact on the sector.

“The industry has a relatively low amount of foreign sales (31% vs. 43% for the entire S&P 500), which is good for a stronger dollar backdrop,” Mazza added.

KIE, IAK and KBWI are exposed to a range of various market segments, with slight differences.

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