State Street debuts its own Russell 2000 ETF, and shifts to Russell indexes on three other funds.
State Street Global Advisors (SSgA), the No. 2 U.S. ETF firm by assets, today rolls out its own ultracheap Russell 2000 ETF and, separately, will also relaunch three other existing exchange-traded funds today, refitting them with Russell indexes and new tickers while dropping their Dow Jones indexes.
The launch of the SPDR Russell 2000 ETF (NYSEArca: TWOK) was something of a surprise, as the plan surfaced suddenly in an electronic communique from the New York Stock Exchange last Friday. Why SSgA would take on IWM, a huge and established Russell 2000 ETF from iShares, isn’t clear, though TWOK will have an annual expense ratio of 0.12 percent, about half that of IWM’s.
That said, the repurposing of the three other funds, which was the subject of a separate NYSE note issued Monday, sheds light on the TWOK launch and suggests SSgA has made the shift to Russell indexes—the Russell 3000; the Russell 1000; and the Russell Small Cap Completeness Index—perhaps because Russell has more brand resonance since Dow Jones was acquired by Standard & Poor's a year ago.
“The launch of TWOK by itself seems like a “me-too” product, but if it’s viewed in the context of the scheduled name/ticker/index changes of three existing funds, you can see it as part of a shift away from Dow Jones indexes to Russell,” IndexUniverse ETF analyst Howard Lee said.
“When it’s all said and done, State Street will be providing a full suite of Russell ETFs,” he added.
Officials at SSgA weren’t immediately available to discuss what strategic considerations led to the company moving away from Dow Jones indexes and adopting Russell benchmarks.
The launch of the Russell 2000 ETF, TWOK, seems particularly challenging to the extent that the iShares Russell 2000 ETF (NYSEArca: IWM) is a $23 billion fund and one of the most liquid U.S.-listed ETFs, as well. And competing aggressively on price seems like it might be the only way for the State Street fund to get traction in a battle for market share with IWM, which costs 0.23 percent a year.
The three funds that are acquiring new names, indexes and tickers are as follows:
- SPDR Russell 3000 ETF (NYSEArca: THRK), a broad all-market U.S. fund replacing the SPDR Dow Jones Total Market ETF that traded under the symbol “TMW.” It had $508 million in assets as of Friday, July 5, and has an annual expense ratio of 0.10 percent, or $10 for each $10,000 invested, or half the 0.20 percent TMW had.
- SPDR Russell 1000 ETF (NYSEArca: ONEK), a large-cap U.S. fund replacing the SPDR Dow Jones Large Cap ETF that traded under the symbol “ELR.” It had $38.3 million in assets as of Friday, July 5, and has an annual expense ratio of 0.10 percent, or half the 0.20 percent ELR had.
- SPDR Russell Small Cap Completeness ETF (NYSEArca: RSCO), a specialty small-cap fund replacing the SPDR Dow Jones Mid Cap ETF that traded under the symbol “EMM.” It had $97 million in assets of Friday, July 5, and has an annual expense ratio of 0.10 percent, or less than half the 0.25 percent EMM had.
The three existing funds will all retain their respective CUSIPs.