SSgA’s Mazza: ETFs For Inflation & Income
October 09, 2012
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Murphy: Are actively managed ETFs one of those areas for growth opportunities as far as product development goes?
Mazza: While it’s still early days with our active asset allocation ETFs, we do see this as a potential area of growth. We are taking the benefits of ETFs as passive underlying vehicles to showcase our institutional asset management capability. We’ve been managing portfolios for many years such as endowments and foundations, through the ETF space. The opportunity set there is quite exciting.
Murphy: Tell me your view on the ongoing price war among ETF providers—most recently headlined by Vanguard’s move to drop MSCI indexes in 22 funds for lower-cost benchmarks. Is SSgA going to fight to keep sector SPDRs the cheapest in market?
Mazza: From an investment standpoint, the decrease of expense ratios is great. Investors are now able to access products at a cheaper fashion. But expense ratios are just one component of the ETF due diligence framework. What index is being used? What’s the underlying methodology? Does the fund manager have the ability to track it and replicate it? And also from liquidity side, while you could have a very-low-cost ETF, does it actually trade? Is your total cost actually higher because you need to trade it, say, on a monthly basis? Expense ratio gets a lot of headline attention, but to me, there’s a lot more to the ETF story than just expense ratios.
SPDR Barclays Capital High Yield Bond ETF (NYSEArca: JNK)
iShares iBoxx $ High Yield Corporate Bond Fund (NYSEArca: HYG)
SPDR Euro Stoxx 50 ETF (NYSEArca: FEZ)
SPDR S&P 500 ETF (NYSEArca: SPY)
SPDR Gold Shares (NYSEArca: GLD)