Daily ETF Watch: 2 New Select Sector SPDRs

October 08, 2015

State Street Global Advisors announced the debut of two additions to its Select Sector SPDR family of ETFs. The Financial Services Select Sector SPDR Fund (XLFS) and the Real Estate Select Sector SPDR Fund (XLRE) both come with an expense ratio of 0.14 percent and join the nine existing funds in the family.

The new funds are the result of a restructuring of the Global Industrial Classification System (GICS) used by S&P Dow Jones Indices and MSCI that separated real estate from the financials sector. XLRE covers that new sector, while XLFS covers the revised configuration of the financials sector. Essentially, both of the new funds are subsets of the $17 billion Financials Select Sector SPDR (XLF | A-87).

The move is interesting because the Select Sector SPDRs were the first sector ETFs, and they have covered the same nine sectors since their launch in 1998 (telecommunications is combined with technology). It also raises questions about what will happen to XLF, which is the largest fund in the family.

Given its success, XLF seems like it’s here to stay. After all, SSgA hasn’t really hewed all that closely to the GICS structure as, from the start, it has combined technology and telecom into one sector for its own purposes. Presumably the two new funds will erode some of XLF’s assets or at least pull new inflows away from it.

This is an unprecedented situation in the ETF space, so it will be interesting to see how it plays out and how SSgA manages the change.

It should be noted that the 14-basis-point fee was extended to all of the other Select Sector SPDRs. Previously, the expense ratio for all of the funds had been 0.15 percent, but it is now 0.14 percent for the entire family, not just the two new funds.

Direxion Plans 4 Bear ETFs

A recent filing from Direxion outlines the firm’s plans for four ETFs that will offer -100 percent exposure to four areas of the market that many believe are overheated.

China ETFs

Two of the funds, the Direxion Daily SME-ChiNext 100 China A Shares Bear 1X Shares and the Direxion Daily MSCI China A Bear 1X Shares, target the China A-shares market, which, until recently, was an investor favorite. However, in August, China’s markets took a massive hit and have been struggling ever since.

The SME-ChiNext 100 is the index that underlies the $33 million Market Vectors ChinaAMC SME-ChiNext ETF (CNXT | D-47), while the MSCI China A International Index underlies the $8 million KraneShares Bosera MSCI China A Share ETF (KBA | F-66).

Both of the China funds come with expense ratios of 0.80 percent.

Health Care ETFs

The Direxion Daily S&P Biotech Bear 1X Shares and the Direxion Daily Healthcare Bear 1X Shares also hone in on a portion of the market that has been doing well lately, but may have topped out.

While the first fund tracks the same index as the $2 billion SPDR S&P Biotech ETF (XBI | A-77), the second is tied to the Health Care Select Sector Index, the same index tracked by the $13.5 billion Health Care Select Sector SPDR (XLV | A-93).

Both of the funds come with an expense ratio of 0.65 percent.


Contact Heather Bell at [email protected].

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