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ETF News

Following Slashing ETF Prices, State Street To Shutdown Three ETFs

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MarketMuse update profiles the the second oldest financial institution in the United States, State Street’s plans to shut down three ETFs after what has been a very difficult year for them. The shutdowns are due to what they call “limited market demand”. With more of an update, an excerpt from InvestmentNews’ Trevor Hunnicutt’s story, “State Street to close three ETFs that attracted little investor interest” from 10 March , is below. 

The announced closure of the ETFs, including one municipal-bond fund in partnership with Nuveen Investments Inc., comes five weeks after the ETF pioneer slashed prices on nearly a third of its funds and while the firm faces outflows in its flagship fund.

State Street, who manages the first-to-market “SPDR” ETFs, will shut its S&P Mortgage Finance ETF (KME), S&P Small Cap Emerging Asia Pacific ETF (GMFS) and SPDR Nuveen S&P VRDO Municipal Bond ETF (VRD), according to a statement Monday. The funds are each at least three years old, but none hold more than $6 million in assets.

State Street, whose money managing arm is also known as SSGA, has $441 billion in U.S. ETF assets, third behind BlackRock Inc.’s iShares and the Vanguard Group Inc. The firm is perhaps best known for its SPDR S&P 500 ETF (SPY), which is commonly recognized as the first ETF traded in the U.S. as well as the most widely traded. That fund has lost $26 billion to investor redemptions this year, according to Morningstar Inc. estimates. State Street, whose index-tracking fund is used widely by tactical traders and institutions along with advisers, has said those flows are cyclical.

Meanwhile, the firm also has tried to expand its lineup to more profitable mutual funds and partnerships on ETFs with Nuveen and DoubleLine Capital’s Jeffrey Gundlach to attract assets into other product lines.

For the entire article from InvestmentNews, click here.

ETF News, Fixed Income

New Rules: SEC Set to Level Playing Field for ETF Issuers

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Are you beginning to wonder why there is an avalanche of news stories profiling corporate bond ETFs? As we’ve posted here at MarketsMuse.com, one good reason might be rising concerns that when interest rates tick up and bond prices tick down, there could be a rush to the exits on the part of investment managers seeking to sell their corporate bond ETFs (or looking to sell select ETFs so as to hedge portfolio exposure in underlying issues held by these managers). Reuters’ Jessica Toonkel and Ashley Lau touch on that topic in recent story profiling a plan on the part of the SEC to “level the playing field” for newer firms entering the ETF Issuer club.

Here’s the extract:

By Jessica Toonkel and Ashley Lau

Reuters – The U.S. Securities and Exchange Commission may strip Vanguard Group, BlackRock Inc and State Street Corp, the oldest and biggest providers of exchange-traded funds, of an advantage they hold over newer rivals in how they assemble the shares of their funds, said sources familiar with the SEC.

etf-issuer-sec-level-playing-fieldsBut BlackRock, Vanguard and a few others, who were among the first to apply with the SEC to create ETFs, are allowed greater leeway: if they need a difficult-to-find security to create shares of their funds, they are permitted to use a similar security – not necessarily the same one – in the fund. This greater flexibility makes it easier and cheaper to run the older funds, and harder for newer entrants into the market such as Northern Trust, Van Eck Global and Charles Schwab Corp to compete.

The agency’s tentative plan – still in its early stages – would affect how companies manage their portfolios in illiquid markets, such as bonds. It may result in allowing the likes of Schwab to compete better with their older rivals, as well as manage their existing bond products at a lower cost.

The agency’s tentative plan – still in its early stages – would affect how companies manage their portfolios in illiquid markets, such as bonds. It may result in allowing the likes of Schwab to compete better with their older rivals, as well as manage their existing bond products at a lower cost.

For the full story from Reuters’ Jessica Toonkel and Ashley Lau, please click here