SSgA cuts expense ratio on Select Sector SPDRs as assets soar

Feb 1st, 2012 | By | Category: Equities

Passive fund management giant SSgA has trimmed the expense ratio on its flagship sector ETFs by two basis points, from 0.20% to 0.18%. The so-called Select Sector SPDRs, which divide the S&P 500 Index into nine individual sector funds, now offer exposure to core US equity sectors for a fee one basis point less than arch-rival Vanguard.

Leading the Select Sector SPDRs asset gainers for 2011 was Utilities (XLU), which soared 106% to end the year with $7.7 billion.

Leading the Select Sector SPDRs asset gainers for 2011 was Utilities (XLU), which soared 106% to end the year with $7.7 billion.

While the move comes soon after Vanguard announced they were slashing fees on a comparable range of funds back in December, SSgA denies the Vanguard price cut influenced their decision.

Dan Dolan, Director of Wealth Management Strategies for the Select Sector SPDR Trust, said that, “as far back as the launch of Select Sector SPDRs 13 years ago, the commitment has been to seek ways to attempt to lower fees for the benefit of all shareholders, particularly as the Select Sector SPDRs experience asset growth.”

The “commitment” to lower fees seems to stack up – since their launch back in 1998, fees on the Select Sector SPDR family of ETFs have steadily dropped from 0.65% to their current level of 0.18% – though of course this probably has more to do with competition from the likes of Vanguard than altruism.

The focus on low cost, however, has helped SSgA maintain their market-leading position in US sector ETFs. Indeed, in 2011 the Select Sector SPDRs saw their combined average monthly assets climb 32%, or $10.5 billion, with average weekly trading volume of approximately one billion shares. As at the time of writing, the funds have over $47 billion in assets under management and are the most liquid vehicles for US domestic sector allocation.

Dolan said, “The economy notwithstanding, 2011 was a banner year for us, both in terms of the increase in our average assets and the growth in our overall year-end assets.” He went on to add that, “with the markets especially choppy last year, investors sought safe havens in defensive sectors like Utilities, Consumer Staples, and Health Care, using the Select Sector SPDRs as equity substitutes to reduce single stock exposure”.

In terms of winners and losers, leading the top three Sector SPDRs asset gainers for 2011 was Utilities (XLU), which soared 106% to end the year with $7.7 billion, followed by Consumer Staples (XLP), which rose 87% to finish at $5.8 billion and Technology (XLK), which finished 2011 up 40% at $8.1 billion.

Materials (XLB) experienced the largest asset decline of the year, ending 2011 down 37%, or a decrease of $958 million, followed by Industrials (XLI) and Financials (XLF), both down 28%, to end the year with decreases of $1.1 billion and $2.1 billion, respectively.

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