State Street’s Stealthy Slash of Sector ETF Fees
February 11th, 2014 at 2:38pm by Todd Shriber
In what may qualify as the quietest exchange traded funds fee reduction in recent memory, State Street’s (NYSE: STT) State Street Global Advisors (SSgA) unit lowered the expense ratios on its nine sector SPDR ETFs to 0.16% per year from 0.18%.
SSgA, the second-largest U.S. ETF sponsor, confirmed the new expense ratios went into effect on Jan. 31. With an expense ratio of 0.16%, the Financial Select Sector SPDR (NYSEArca: XLF) is now three basis points cheaper than its primary rival, the Vanguard Financials ETF (NYSEArca: VFH). XLF is by far the largest U.S. sector ETF with $16.2 billion in assets under management, according to State Street data.
The Technology Select Sector SPDR (NYSEArca: XLK) is the second-largest sector ETF with $13.5 billion in AUM. XLK is also now charging just 0.16% per year. The Industrial Select Sector SPDR (NYSEArca: XLI) and the Health Care Select Sector SPDR (NYSEArca: XLV) are also now charging 0.16%. After surpassing the Energy Select Sector SPDR (NYSEArca: XLE) as the third-largest U.S. sector ETF late last year, XLV was quickly passed by XLI for the “bronze medal” in sector ETF heft. [Battle for Third Spot Among Sector ETFs]
XLI and XLV are currently locked in a tight battle for the third spot with XLE well behind in the fifth spot. News of the lower fees on the nine SPDRs comes as investors continue to embrace sector ETFs even as U.S. equities have struggled to start 2014. U.S. sector ETFs raked in $2.9 billion last month with health care and technology combining for $2.2 billion of that total, according to BlackRock. [ETFs Lose Almost $10 Billion in January]
Year-to-date, only XLV and the Utilities Select Sector SPDR (NYSEArca: XLU) are in the green among the nine sector SPDRs. At the start of trading Tuesday, XLE was the worst performer of the nine this year.
Although competition in the sector ETF space, notably due to Vanguard and the recent entry of Fidelity, has increased markedly in recent years, the nine SPDRs have seen impressive compound annual growth over the past several years. [SPDRs Still King as Sector Competition Rises]
All nine of the sector SPDRs appear on the list of the 100 largest U.S. ETFs, but only one comparable ETF from a rival issuer is on that list. The Vanguard REIT ETF (NYSEArca: VNQ) is the largest sub-sector or industry ETF with over $18 billion in assets.