ETF Watch: SSgA Debuts Gold Fund

Today State Street Global Advisors is rolling out an ETF that is very similar to its $30 billion SPDR Gold Trust (GLD), except for the fact that it comes with a currency hedge. The SPDR Long Dollar Gold Trust (GLDW) will hold a long position in physical gold in U.S. dollars and take a short position in a basket of reference currencies.

GLDW’s total expense ratio is expected to be 0.50%. It is listed on the NYSE Arca exchange.

The product tracks the Solactive GLD Long USD Gold Index, the name of which suggests that the fund will invest in the SPDR Gold Trust for its physical gold exposure, although this does not appear in the documentation anywhere. According to the prospectus, the index “reflects the price of Gold in U.S. dollars adjusted by the price of each Reference Currency comprising the FX Basket against the U.S. dollar.”

The term “reference currencies” is not strictly defined, but in this case encompasses the following six currencies: the euro, Japanese yen, British pound sterling, Canadian dollar, Swedish krona and Swiss franc.

The prospectus notes that the index will generally go up when the price of gold in U.S. dollars goes up, or when the value of the U.S. dollar increases against the basket of shorted currencies, and vice versa. However, GLDW’s direction will be determined by the net effect of the change in gold price and the movement of the U.S. dollar against the currency basket.

GLDW is obviously intended as a complement to GLD, which costs 10 basis points less than GLDW. As 2017 gets rolling with an exceptionally strong dollar, there is evidence that currency may have renewed importance to investors, which could drive assets into GLDW.

Vanguard Slashes Fees On Active Funds

Vanguard recently reported lower expense ratios on 21 of its mutual fund shares, most of which represented actively managed funds. The move, Vanguard says, saved its clients $25 million last year. However, one fund saw its fee cut by a full 50%.

An interesting policy of the firm’s is its practice of cutting the fees on actively managed funds that underperform. It also lowers fees on index-based products when their assets increase, but the penalizing of underperforming active managers is largely unique to Vanguard.

Nine traditional actively managed mutual funds and 11 share classes saw their fees reduced, while one share class saw its fee increased. Most of the funds in question saw their fees cut by a basis point or two, but most shocking was the fee reduction for the Vanguard Capital Value Fund (VCVLX), which saw its expense ratio slashed from 0.50% to 0.25%, a rather stunning amount. VCVLX had a positive return for 2016, but apparently that wasn’t enough to maintain its expense ratio.

VCVLX is included in Vanguard’s family of fundamentally managed active equity funds.

Vanguard also trimmed fees on share classes of its short-term inflation-protected index fund and its target retirement funds.

Contact Heather Bell at [email protected].