State Street Global Advisors Calls for Clearer Classification of ETFs
SYDNEY - October 19, 2011
State Street Global Advisors (SSgA) is working actively with global regulators to raise levels of understanding about the Exchange Traded Fund (ETF) market to ensure investors know exactly what they are buying, says the firm’s global head of SPDR® ETFs, Jim Ross.
Mr Ross, the Boston-based architect of the SPDR S&P®/ASX 200 Fund, which this year marks 10 years of trading on the Australian Securities Exchange, said SSgA supports any introduction of new measures to help investors distinguish between the many products now included under the broader exchange traded product umbrella.
“Greater scrutiny of ETFs by regulators in recent months represents an important opportunity for the entire industry to promote a better understanding of these rapidly evolving products. Not all ETFs are created equal. There are significant structural differences between the products despite them all being referred to under the collective ETF name,” he said.
He pointed to a recent report by SSgA titled ‘Insights into Evaluating ETFs’ which says basic research such as looking at an ETF’s underlying index is no longer sufficient. Optimised structures via swaps and derivatives, along with ETFs offering highly leveraged positions, have brought complexity and opacity to what was previously a largely ‘plain vanilla’ ETF market, the report says.
“Assessing critical factors such as tracking method, index methodology and overall cost are important in order to best determine whether the ETF fits the desired risk/return profile and investment objective of the investor.”
Perhaps most importantly, Mr Ross added, investors needed to consider ETF providers with a strong indexing track record.
He said ETFs such as those offered under SSgA’s SPDR brand are low-cost, robust and precise products, which over nearly two decades have provided global investors certainty during periods of market volatility.
SPDR ETFs are all physically backed – owning the securities that represent the relevant index – and are firmly established in the portfolios of retail and institutional investors around the world.
“Let’s not forget that ETFs have been one of the investment success stories of recent years with almost 4,000 funds listed globally worth an estimated US$1.47 trillion1,” he said. “This is not surprising given that they are cost efficient, can be bought and sold during the day, and the great majority are completely transparent in that investors have an accurate view of their holdings throughout the day.”
“We expect that with the imminent changes to the superannuation advice regime in Australia, ETFs will continue to be embraced by investors to the point where we anticipate the ETF market growing to A$38 billion by the end of 2015.”
The SPDR S&P/ASX 200 Fund, known by the ticker STW, tracks the market’s most widely used index and remains Australia’s most liquid ETF2 with A$1.95 billion3; in funds under management (FUM) as at 30 September 2011.
Combined with the six other ASX-listed SPDR ETFs, SSgA’s total FUM in the Australian ETF market amounted to A$2.55 billion3; as at 30 September 2011. This represents 62 percent of overall ETF market capitalisation and confirms SPDR ETFs as Australia’s dominant ETF provider, according to ASX Listed Managed Investments data.
SSgA, the investment management arm of State Street Corporation (NYSE: STT), is recognised as the global ETF industry pioneer, having created the world’s first ETF in 1993 (the SPDR S&P 500). It managed approximately US$244 billion4 of ETF assets worldwide as at 30 September 2011.
Apart from the STW, SSgA also offers the SPDR S&P/ASX 50 Fund (SFY), the SPDR S&P/ASX Listed Property Fund (SLF), the SPDR MSCI Australia Select High Dividend Yield Fund (SYI), the SPDR S&P/ASX 200 Resources Fund (OZR), the SPDR S&P/ASX Small Ordinaries Fund (SSO) and the SPDR S&P/ASX 200 Financials ex A-REIT Fund (OZF).
1 Bloomberg, SSgA Global ETF Strategy & Research, as at 30 September 2011.
2 Bloomberg as at 30 September 2011.
3 SSgA as at 30 September 2011.
4 This AUM includes the assets of the SPDR Gold Trust (approx. US$64 billion as of 30 September 2011),
for which State Street Global Markets, LLC, an affiliate of State Street Global Advisors, serves as the marketing agent.
About SPDR® ETFs
Offered by State Street Global Advisors, SPDR ETFs are a family of ETFs that provide
investors with the flexibility to select investments that are precisely aligned to
their investment strategy. Recognised as an industry pioneer, State Street Global Advisors
created the first ever ETF in 1993 – the SPDR S&P 500, which is currently the world’s
largest ETF^. In 2001, SSgA introduced ETFs in Australia when it launched the SPDR
S&P/ASX 200 Fund and the SPDR S&P/ASX 50 Fund. Currently, State Street Global Advisors manages approximately
US$244 billion of ETF assets worldwide*.
^ Bloomberg, as of 30 September 2011.
* As of 30 September 2011. This AUM includes the assets of the SPDR Gold Trust (approx.
US$64 billion as of 30 September 2011), for which State Street Global Markets, LLC, an affiliate of State Street Global Advisors serves as the marketing agent.
About State Street Global Advisors
SSgA is a global leader in asset management. The firm is relied on by sophisticated
investors worldwide for its disciplined investment process, powerful global investment
platform and access to every major asset class, capitalisation range and style. SSgA
is the asset management business of State Street, one of the world’s leading providers
of financial services to institutional investors.
Disclaimer: State Street Global Advisors, Australia, Limited (ABN 42 003 914 225) (“SSgA Australia”) is the holder of an Australian Financial Services Licence (AFSL Number 238276). SSgA Australia’s Responsible Entity, State Street Global Advisors, Australia Services Limited (ABN 16 108 671 441) ("SSgA, ASL") holds an Australian Financial Services Licence (AFSL Number 274900) pursuant to Section 913B of the Corporations Act 2001. Registered office: Level 17, 420 George Street, Sydney, NSW 2000, Australia · Telephone: 612 9240-7600 · Facsimile: 612 9240-7611 · Web: www.ssga.com.
The issuer of units in SPDR S&P/ASX 200 Fund (ARSN 097 712 377), SPDR S&P/ASX 50 Fund (ARSN 097 712 420), SPDR S&P/ASX 200 Listed Property Fund (ARSN 099 389 821), SPDR MSCI Australia Select High Dividend Yield Fund (ARSN 145 353 591), SPDR S&P/ASX 200 Resources Fund (ARSN 149 870 002), SPDR S&P/ASX Small Ordinaries Fund (ARSN 149 869 992), and SPDR S&P/ASX 200 Financials Ex AREIT Fund (ARSN 149 870 020) ("the Funds") is SSgA, ASL. A Product Disclosure Statement ("PDS") for units in the Funds is available at www.spdrs.com.au. Investors should consider the PDS in deciding whether to acquire, or continue to hold, units in an ETF. An investment in the Funds does not represent a deposit with or a liability of any company in the State Street Corporation group of companies including State Street Bank and Trust Company (ABN 70 062 819 630) (AFSL Number 238276) and is subject to investment risk including possible delays in repayment and loss of income and principal invested.
ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs net asset value. Brokerage commissions and ETF expenses will reduce returns.
"SPDR" is a trademark of Standard & Poor’s Financial Services LLC ("S&P") and has been licensed for use by State Street Corporation. STANDARD & POOR’S, S&P, SPDR and S&P 500 have been registered in many countries as trademarks of Standard & Poor’s Financial Services LLC and have been licensed for use by State Street Corporation. No financial product offered by State Street Corporation or its affiliates is sponsored, endorsed, sold or promoted by S&P or its affiliates, and S&P and its affiliates make no representation, warranty or condition regarding the advisability of buying, selling or holding units/shares in such products. Further limitations and important information that could affect investors’ rights are described in the PDS for the applicable product.
Standard & Poor’s S&P Indices are trademarks of Standard & Poor’s Financial Services LLC.
"S&P" and "ASX", as used in the terms S&P/ASX 200, S&P/ASX 50, S&P/ASX 200 Listed Property, S&P/ASX 200 Resources, S&P/ASX 200 Financials ex A-REIT, S&P/ASX Small Ordinaries, are trademarks of the Australian Securities Exchange ("ASX"), and Standard & Poor’s Financial Services LLC ("S&P") respectively, and has been licensed for use by SSgA Australia. SPDR products are not sponsored, endorsed, sold or promoted by S&P or ASX, and neither S&P nor ASX makes any representation regarding the advisability of investing in SPDR products.
MSCI Australia Select High Dividend Yield Index is a trademark of MSCI, Inc. (“MSCI”) and has been licensed for use for certain purposes by SSgA. The Fund is based on a custom MSCI Index and is not sponsored, endorsed, sold or promoted by MSCI, any of its affiliates, any of its information providers or any other third party involved in, or related to, compiling, computing or creating any MSCI Index. MSCI makes no warranties and bears no liability with respect to the Fund. MSCI has no responsibility for and does not participate in the management of the Fund assets or sale of the Fund shares. The PDS contains a more detailed description of the limited relationship MSCI has with SSgA.
This information is not intended to amount to advice or a recommendation to invest in SPDR. It does not take into account your investment objectives, financial situation or particular needs. You should seek professional advice addressing your particular investment needs, objectives and financial circumstances before making an investment decision.
The whole or part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSgA Australia’s express written consent.
