SSgA casts a broad net with three new active ETFs designed to protect against market uncertainties.
(Upated to include comments from SSgA's head of U.S. Portfolio Management.)
State Street Global Advisors (SSgA), the fund sponsor behind the SPDR ETFs, today launched its first three actively managed ETFs, marking its entry into a niche of the market that is drawing increasing attention from major ETF providers.
The three new funds represent half of six active funds SSgA originally filed for last April. The funds coming out today emphasize inflation-protected asset allocation strategies. The investment approaches that are described in the prospectus include using exchange-traded products, most of which are index securities.
At a press conference in Manhattan announcing the launch, Chris Goolgasian, SSgA head of U.S. portfolio management, said that the new funds, which mix equities with bonds, are meant to provide higher return alternatives to the $1 trillion that fled to the security of the bond market in the wake of the 2008 credit crisis, much of which is now losing ground to an inflation rate of 3 percent.
“A lot of that money has gone into bond funds with 2 percent yields,” said Goolgasian.” But it isn’t really safe when inflation is greater than returns.”
The three new funds, their tickers and expense ratios are as follows:
- SPDR SSgA Multi-Asset Real Return ETF (NYSEArca: RLY) comes with a total net expense ratio of 0.70 percent. This fund seeks both capital appreciation and current income through investment in exchange-traded products that include securities focused on inflation protection; real estate; commodities; and companies in the natural resources space.
- SPDR SSgA Income Allocation ETF (NYSEArca: INKM) comes with a total net expense ratio of 0.70 percent. This ETF is a total return fund focusing on income- and yield-generating assets including U.S. and international equities; debt securities; debt/equity hybrids such as preferred stocks and convertible bonds; as well as real-estate securities.
- SPDR SSgA Global Allocation ETF (NYSEArca: GAL) comes with a total net expense ratio of 0.35 percent. The fund seeks current income and capital preservation, with a secondary emphasis on capital appreciation. The active ETF will provide “balanced exposure” to U.S. and international debt and equity, with the balance shifting over time.
More than 99 percent of the $1.174 trillion in assets under management are in passive funds and a good portion of the active $5.2 billion ETF money actually is in one fund, the $1.56 billion Pimco Enhanced Short Maturity Strategy Fund (NYSEArca: MINT). Active funds, which depend upon an advisor’s acumen for their performance, generally have produced disappointing performance in comparison to passively managed ETFs, which track an index, as Standard & Poor’s SPIVA report rarely fails to show.
However, ETF giants such as iShares, which just won regulatory approval last March to develop active ETFs, are building out the active space with a variety of funds, many of which are oriented toward the more illiquid bond market that generally presents more challenges to passively managed funds.