One area where Arnott sees value is financial services etfs. The logic is that bank failures and combinations will make the surviving banks stronger with more market share and pricing power. Financial services ETFs include the Dow Jones U.S. Regional Banks Index Fund (IAT), KBW Regional Banking ETF (KRE), and KBW Bank ETF (KBE).
Arnott’s firm has also developed a series of indexes based on research he has done on dividends and stock performance. Several ETFs have launched using the Research Affiliates Financial Index (RAFI) as a benchmark including the PowerShares FTSE RAFI Consumer Goods Sector Portfolio (PRFG) and the FTSE RAFI US 1000 Portfolio (PRF).