IAI vs KBE: Which ETF Is Better in 2026?
A metric-by-metric comparison of iShares U.S. Broker-Dealers & Securities Exchanges ETF (IAI) and State Street SPDR S&P Bank ETF (KBE) — both Financial funds — using ETFValuer's daily-updated rankings.
Educational content — not financial advice. Data as of July 25, 2026. ~5 minute read.
The Verdict
IAI and KBE compete directly — both are Financial funds chasing the same job in a portfolio. That makes this a genuine either/or: the index each tracks, what it costs, and how it has handled drawdowns are what separate them, not the broad exposure they give you.
On ETFValuer's overall model — which blends return, risk-adjusted performance, cost, drawdown, size and volatility — KBE scores higher: 57.8 (Grade C) versus 51.2 for IAI. That doesn't make IAI a bad fund; it means KBE currently edges it out on this specific mix of factors. Read the metric-by-metric breakdown below before deciding which matters more for your own portfolio.
Head-to-Head: Every Metric
| IAI | KBE | |
|---|---|---|
| Category | Financial | Financial |
| Expense ratio | 0.38% | 0.35% |
| Fund size (AUM) | $1.3B | $1.5B |
| Dividend yield | 1.17% | 2.15% |
| 1-year return | +9.23% | +20.90% |
| 3-year return | +98.79% | +79.31% |
| Volatility | 20.12% | 21.34% |
| Max drawdown | -23.14% | -25.98% |
| Sharpe ratio | 0.21 | 0.75 |
| ETFValuer score | 51.2 | 57.8 |
| Grade | C | C |
| Overall rank | #373 | #280 |
Bold marks the better value in each row. "Better" is directional only (e.g. lower cost, higher return) — it isn't a recommendation by itself. See the full methodology.
Cost
KBE is the cheaper fund, charging 0.35% a year versus 0.38% for IAI — a gap of 0.03 percentage points (about $3.00/year on a $10,000 position) that compounds meaningfully over a multi-decade holding period. See the ETF Fee Calculator for the exact dollar impact at your investment size and horizon.
What IAI's Fees Cost You
IAI charges an expense ratio of 0.38% a year, deducted automatically from the fund's value. Small percentages compound into real money — adjust the figures below to see the impact on your own numbers.
Assumes a constant gross return and no additional contributions — a simplification, but it isolates exactly what the expense ratio costs. Try the full fee calculator to model contributions and compare any two funds.
Performance & Risk
Over the trailing 3 years, IAI returned +98.79% versus +79.31% for KBE — a gap of about 19.5 percentage points. On risk, IAI has held up better historically, with a shallower max drawdown (-23.14% vs. -25.98%). KBE currently has the better risk-adjusted return (Sharpe ratio of 0.75 vs. 0.21), meaning it delivered more return per unit of volatility taken on.
How Closely Do They Track Each Other?
Over the last 3.0 years of daily returns (752 shared trading days), IAI and KBE show a moderate correlation of 0.714 — related but meaningfully different. That's loose enough that the two funds do behave differently in a meaningful share of market conditions — holding both is defensible if you want exposure to each mandate.
| Measure | Value | What it means |
|---|---|---|
| Daily return correlation | 0.714 | Moderate — related but meaningfully different |
| R-squared | 51.0% | 51.0% of IAI's daily moves are explained by KBE's |
| Tracking error (annualised) | 17.86% | Typical yearly spread between the two funds' returns |
| Annualised return over 3.0y | IAI +25.47% · KBE +23.11% | IAI ahead by 2.36 points a year |
Correlation alone understates how far these can drift. Across every rolling 12-month window in the period, IAI finished as much as +36.7 points ahead of KBE at the best extreme and -20.4 points at the worst — a 57.1-point spread between the best and worst year of relative performance. Two funds can correlate tightly day to day and still deliver very different outcomes over any single year you happen to hold them.
Calculated from daily total returns over the trailing 3-year window, recomputed every day this site refreshes. Correlation of 1.00 means the two funds moved in lockstep; 0.00 means their daily moves were unrelated.
Holdings Overlap
IAI and KBE share no companies among their top 10 reported holdings. That points to genuinely different exposure, so holding both is more likely to diversify than to duplicate. Full portfolios may still overlap further down the list.
Based on the top 10 holdings in each fund's most recent SEC N-PORT-P filing.
Which One Should You Pick?
Lean IAI if…
- You weight recent results heavily — it returned 98.8% over 3 years against 79.3%
Lean KBE if…
- You want the lower running cost — 0.35% vs 0.38%, about $3 a year less on a $10,000 position
- Current income matters to you — it yields 2.15% against 1.17%
- You care about return per unit of risk — its Sharpe ratio of 0.75 beats 0.21
Whichever you pick, holding both at full weight is usually the wrong answer — see the overlap and correlation sections above.
Frequently Asked Questions
Is IAI or KBE better?
On ETFValuer's overall model — which blends return, risk-adjusted performance, cost, drawdown, size and volatility — KBE scores higher: 57.8 (Grade C) versus 51.2 for IAI. That doesn't make IAI a bad fund; it means KBE currently edges it out on this specific mix of factors. Read the metric-by-metric breakdown below before deciding which matters more for your own portfolio.
Which has the lower expense ratio, IAI or KBE?
KBE currently has the lower expense ratio (0.35% vs. 0.38%).
Can I hold both IAI and KBE?
Yes, and it may be worth doing. IAI and KBE correlate at only 0.71 over the past 3.0 years, so they behave differently enough that holding both is a genuine diversification decision rather than a redundant one. Size each to the role you want it to play.
Go deeper on either fund
Full daily-updated metrics, holdings context, and category peers.