SSgA & PowerShares Clash Over KBW Products

December 30, 2011

On Oct. 24, State Street Global Advisors changed the indexes on five of its ETFs from benchmarks provided by KBW to a quintet from Standard & Poor’s in a shift that belied a bit of intrigue involving Invesco PowerShares.

Indeed, four of the KBW indexes SSgA dropped were adopted by four new ETFs PowerShares rolled out Nov. 1. One industry source told IndexUniverse that SSgA sped up the transition to the new indexes before the launch date of the PowerShares funds—a move PowerShares hoped to block, possibly with legal action.

Officials at both companies declined to comment on the timing and legal issues surrounding the index changes and the PowerShares fund launches.

An SSgA official said his Boston-based firm made the changes to line up the indexes on the five finance-related ETFs with its other sector funds, all of which are based on S&P indexes. Meanwhile, Wheaton, Ill.-based PowerShares was interested in expanding its relationship with Keefe, Bruyette & Woods and taking advantage of its KBW lineup of finance-specific indexes. PowerShares has a few products using KBW indexes, including the $21.7 million KBW High Dividend Yield Financial Portfolio (NYSE Arca: KBWD).

The SSgA funds retained their tickers, but were renamed, with “S&P” replacing “KBW”:

  • SPDR S&P Bank ETF (NYSE Arca: KBE)
  • SPDR S&P Capital Markets ETF (NYSE Arca: KCE)
  • SPDR S&P Insurance ETF (NYSE Arca: KIE)
  • SPDR S&P Mortgage Finance ETF (NYSE Arca: KME)
  • SPDR S&P Regional Banking ETF (NYSE Arca: KRE)

The four new PowerShares ETFs include:

  • PowerShares KBW Bank Portfolio (NYSE Arca: KBWB), which is based on the KBW Bank Index
  • PowerShares Regional Banking Portfolio (NYSE Arca: KBWR), which is based on the KBW Regional Banking Index
  • PowerShares Capital Markets Portfolio (NYSE Arca: KBWC), which is based on the KBW Capital Markets Index
  • PowerShares Insurance Portfolio (NYSE Arca: KBWI), which is based on the KBW Insurance Portfolio Index

 

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