State Street Launches TIPS, Payout ETFs

May 30, 2013

State Street Global Advisors launched two ETFs that cater to very different investor needs—one of them a short-dated TIPS fund that looks to offer protection against inflation, and the other a global dividend ETF that sets out to find high-yielding companies worldwide.

Overall, State Street’s plans fit into two broad trends of the past few years wherein investors have, on the one hand, looked for sources of income away from the paltry returns in the traditional U.S. bond market, but at the same time have remained concerned about prospects for higher inflation ahead. Inflation has a very corrosive impact on portfolio returns, especially fixed income.

Neither fund is a particularly new idea, but they expand State Street’s footprint into hot segments of the market.

The SPDR Barclays 1-10 Year TIPS ETF (NYSEArca: TIPX), which will track the Barclays 1-10 Year Government Inflation-linked Bond Index, will invest in Treasury inflation-protected securities that have a maturity of less than 10 years and an issue size of at least $500 million. TIPS are U.S. Treasury securities designed to provide inflation protection, according to the filing.

TIPX will join other TIPS funds, including State Street’s own $737 million SPDR Barclays TIPS ETF (NYSEArca: IPE), which has an average maturity of 9.67 years and a real adjusted duration of 8.67 years. Real adjusted duration is a measure of the percentage price change of a TIPS security relative to the change in interest rates.

IPE is serving up a 30-Day SEC yield of -0.13 percent and has an annual expense ratio of 0.1845 percent. TPIX costs 0.15 percent.

Global Payout ETF

The SPDR S&P Global Dividend ETF (NYSEArca: WDIV) will track the S&P Global Dividend Aristocrats Index, and invest in high-yielding global companies included in the S&P Global BMI Index that have a track record of stable or increasing dividends for the last 10 consecutive years. WDIV costs 0.40 percent.

Securities must also meet requirements for float-adjusted market-capitalization requirements—at least $1 billion—and liquidity.

Diversification requirements also cap the number of securities per country at 20 stocks, and at 35 per GICs sector. No single security can represent more than 3 percent of the portfolio, and no single country or sector can snag more than a quarter of the overall mix, the filing said.

WDIV will compete with the WisdomTree Global Equity Income ETF (NYSEArca: DEW), and the Guggenheim S&P Global Dividend Opportunities ETF (NYSEArca: LVL)—which also picks names from countries included in the S&P Global BMI Index. DEW costs 0.58 percent a year, while LVL comes with a 0.60 percent price tag.


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