With investment management firms trying to diversify and offer clients exposure to all sectors and markets, there is yet another influx of new exchange traded funds (ETFs).
Heather Bell of Index Universe notes that the new funds to hit the market by State Street Corp. are:
- SPDR Barclays Capital Mortgage Backed Bond ETF (MBG), which will invest in investment-grade mortgage bonds, holds 14 securities, tracks 1,700 components and charges an expense ratio of 0.20%. It will be in competition with iShares Barclays MBS Bond Fund (MBB), which charges an expense ratio of 0.36%, tracks 18 securities and around 400 components.
- SPDR Barclays Capital Short-Term International Treasury Bond ETF (BWZ), which will invest in one-to-three-year government bonds issued by 229 investment-grade countries outside of the U.S. It has 38 different holdings and charges an expense ratio of 0.35% and will be competing with the iShares S&P/Citigroup 1-3 Year International Treasury Bond Fund (ISHG). ISHG has 20 components and also charges 0.35%. Japan, Germany and Italy are top weightings in both funds.
Christpopher Codon of Bloomberg states that these new ETFs will attract demand from retail investors for bonds hit by the slump of the U.S. housing market and the resulting credit crunch. This could be good news for State Street, in that the only other ETF that targets mortgage backed bonds on the market are offered by iShares. They launched last week.
These new funds will combine the stock and bond picking appeal of actively managed mutual funds with the trading flexibility of ETFs, in addition to giving investors another way to gain cost-effective international fixed-income access.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.