There is something to that assertion. The Financial Select Sector SPDR (NYSEArca: XLF) is by far the largest U.S. sector ETF with $14.7 billion in assets followed by the Technology Select Sector SPDR (NYSEArca: XLK) with $12.1 billion.
The Energy Select Sector SPDR (NYSEArca: XLE) and the Health Care Select Sector SPDR (NYSEArca: XLV) are battling for the bronze medal among sector ETFs with $8.2 billion and $8 billion in AUM respectively. Meanwhile, the only Vanguard sector ETF to rank among the 100 largest U.S. ETFs is the firm’s rival to XLK. [XLE, XLV Battle for Third Spot Among Sector ETFs]
Mazza said institutional investors are increasingly interested in the SPDRs because more of those investors are building out sector rotation strategies.
International markets are also bolstering the growth of the SPDRs.
“Pension plans and non-U.S. institutional investors are becoming more interested in sector ETFs,” said Mazza.
That jibes with news out earlier this week that Latin American pension plans are increasing their use of U.S. ETFs, a movement Mazza notes is being led by Chile. [Latin America: New ETF Growth Frontier]
“Most of our foray in Latin America has been on the equities side because local bonds have higher yields than U.S. bonds,” said Mazza. “Chile is really taking the lead in terms of using U.S. ETFs.”
Mazza said Chileans can purchase the nine SPDRs, the SPDR S&P 500 (NYSEArca: SPY) and SSgA’s industry funds for use in their pension plans.
As for the expense ratio competition, it is not all about fees all the time.
“Advisors have become more sophisticated when it comes to cost,” said Mazza. “Total cost of ownership, commissions, tracking error; that conversation has picked up in intensity. The SPDRs have some of the lowest tracking error. Our size and efficiencies help.”