State Street's new ETFs target retail market
State Street Global Advisers (SSgA) has added a small cap exchange-traded fund (ETF) and two sector ETFs to service the rapidly growing Australian ETF market.
The sector ETFs are a resources and a financials ETF, each based on the S&P/ASX 200 Index, while the small cap fund is based on the S&P/ASX300 less the S&P/ASX100.
The financials ETF will exclude Australian real estate investment trusts and is aimed at investors who want exposure to growth cycles and higher franking credits with stable dividends. The small cap ETF is aimed at investors who want a slightly higher risk and return opportunity, the firm stated.
Based on historical ASX data and extrapolating the growth seen in the US market in the past 10 years, SSgA predicted the Australian ETF market would grow from its current level of around $4.5 billion by around 50 per cent per year to more than $35 billion in 2015, according to SSgA’s senior managing director in Australia Rob Goodlad.
With the proliferation of SMSFs it was important for SSgA to find products that were relevant to the retail market in Australia, Goodlad said.
It is even possible some personal investors may be thinking it would be cheaper to organise their SMSF portfolios themselves using ETFs rather than pay an adviser on a fee-for-service basis to do it, he said.
SSgA’s president and director, global head of ETFs, Jim Ross, said while the retail market was growing SSgA wanted to target all investors.
The institutional channels in the US have aggressively taken on the use of ETFs in the last couple of years to get exposures to sectors or commodities including gold and emerging markets small cap equities.
It is important to find the right balance for the market and to talk to investors to see what type of products they would like to see, although it’s not always possible to bring to market every product that investors would like to see, Ross said.
SSgA Australia senior product engineer Jonathan Shead said that when developing the new range of ETFs SSgA looked at what the key themes for the current market were and realised the three largest and most significant themes were: a resources play; interest rate and banks; and small caps.
“The larger and more significant the theme, the more you attract liquidity, the more efficient an ETF is, the less likely you are to have a dud product five years down the track,” Shead said.
The new funds bring the number of ETFs offered by SSgA in Australia to seven. Product Disclosure Statements should be available on the new range by the end of this week, SSgA stated.
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