January 04, 2007

SPDRs Spread Their Web

SSgA has filed for the right to launch 16 new international ETFs, in one of the most important ETF filings in recent history. The new funds will give SSgA a complete lineup of global and regional ETFs, and will position the company to capitalize on the growing interest in international investing. The filings will put significant pressure on BGI, which has had, until this year, a near monopoly on international ETFs.

The funds are shown in the shaded box below.

Some of the funds—like the Europe, World, Japan and Asia Pacific funds—simply fill obvious holes in SSgA's ETF lineup. Others, like the Middle East & Africa ETF, capture sections of the market that investors did not previously have a way to access. The global real estate and infrastructure products are perfectly pitched to capture recent trends in the marketplace, and are likely to meet with a strong reception from investors.

It is interesting—and commendable—that SSgA went with a regional approach, rather than a country-specific strategy. BGI owns the single-country ETF space, and SSgA clearly thinks it can move into the regional space.

Previously, SSgA offered just three international ETFs, including two Europe funds and one GlobalTitans ETF.

Japan Rising, And SSgA With It

The first of the new SSgA international funds debuted in November, as SSgA launched the streetTRACKS Russell/Nomura PRIME Japan ETF (AMEX: JPP) and streetTRACKS Russell/Nomura Small Cap Japan ETF (AMEX: JSC) on the American Stock Exchange(AMEX).

The underlying indexes are jointly managed by Russell and Nomura, and use the same general methodology and rules as Russell's U.S. indexes.

The "PRIME" index tracks the 1,000 largest companies in the Japanese market, covering the vast majority of that market. At the last rebalancing, the index included stocks with market caps as low as $183 million.

The SmallCap index overlaps with the PRIME index, tracking the smallest 15 percent of companies in Japan. At the last rebalance, that worked out to a market-cap cutoff of approximately $1 billion. Both indexes are adjusted for float, and both ETFs charge 56 basis points in expenses.

The ETFs will go head-to-head with competing Japan funds from BGI and WisdomTree.

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