State Street Plans Active ETFs, Breakeven Inflation Fund
December 9th 2011 at 9:38am by ETF Trends
State Street wants to launch actively managed exchange traded funds next year, according to a report.
“We hope to introduce our first set of active ETFs in 2012,” Jim Ross, global head of ETFs at State Street Global Advisors, told Mutual Fund Wire. “The initial set is probably going to be a suite of five to six active ETFs rolled out over a few months.”
SSgA manages the biggest and oldest ETF, SPDR S&P 500 (NYSEArca: SPY), which was introduced in 1993 and holds about $94 billion in assets. The firm is the second-largest ETF manager in the U.S. with $264.5 billion in assets at the end of November, according to National Stock Exchange data.
A recent report by McKinsey & Co. predicts that the actively managed exchange traded fund business will take off and hit the $1 trillion mark within a decade. Currently, active funds represent only a tiny fraction of the overall business. [Active ETFs]
According to the New York Stock Exchange, growth in the U.S. exchange traded fund market will likely be supported by actively managed ETFs. [Active Funds to Support Growth]
BlackRock, which oversees the iShares funds, has also filed to launch active ETFs. [Blackrock Plans Active Funds]
One persistent challenge for active ETFs is providing the necessary disclosure for the fund to trade properly. [Disclosure Issues for Active ETFs]
“It’s a question of when, not if, active ETFs will be part of the landscape,” said Tony Rochte, head of the North American intermediary business group at SSgA. [Index ETFs Still Rule]
Separately, State Street has filed to launch a pair of new fixed-income ETFs. The company is readying a breakeven inflation ETF and a commercial paper fund that strips out the financial sector, according to the filing.
The “breakeven” rate of inflation is the level of inflation required for Treasury Inflation Protected Securities (TIPS) to approximate the performance of U.S. Treasury securities with equivalent duration, according to the filing. The tracking index takes long positions in TIPS and shorts traditional Treasury bonds.
Full disclosure: Tom Lydon’s clients own SPY.