SPDR Launches Range of U.S. Sector ETFs

SPDR has launched a range of sector specific exchange traded funds (ETFs) that track U.S. equities, allowing investors to be more precise in their exposure and to choose an area of the market depending on the economic cycle.

The nine ETFs are weighted by market capitalisation and cover the following sectors: consumer discretionary, consumer staples, energy, financials, health care, industrial, materials, technology and utilities. While technology stocks tend to do well during an economic recovery, for example, utilities are known as stable and defensive positions during a market downturn.

Taking a closer look at one fund: the SPDR S&P U.S. Consumer Staples Select Sector UCITS ETF (ticker ZPDS) tracks 38 U.S. consumer staples stocks in the S&P 500 Index. It has produced annualised net returns of 13.31 percent over three years.

All the new funds are physically replicated, have a total expense ratio of 0.15 percent and a base currency of USD. They listed today on the Deutsche Börse and will list on the London Stock Exchange.

Alexis Marinof, head of SPDR ETFs for Europe, Middle East and Africa said in a statement: “Sector indices have historically displayed higher return dispersion and more discrete exposures than style indices such as large cap, small cap and value. With markets anticipating the first U.S. interest rate hike of the economic cycle later this year, these U.S. sector ETFs help investors to balance the potential for risk and return in their portfolios.”

Sector ETFs are gaining momentum in Europe. Research from Markit in February found that flows into sector ETFs in 2014 reached $1.6 billion, the strongest record since 2009, and just under $1 billion between 1 January and 16 February. Investment guru Richard Bernstein told ETF.com in May that sectors, not geographies, are the real drivers of returns.