SSgA’s Mazza: ETF Closures Are Good
January 07, 2013
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The world of ETFs is truly taking off, and last year’s record number of closures is a healthy sign that the industry is focused on quickly pruning strategies that aren’t working out so that it can focus on the growth ahead, David Mazza, ETF strategist at State Street Global Advisors, said in an interview with IndexUniverse.
Product innovation is looking particularly promising in the fixed-income space, where it appears the focus is increasingly on funds cherry-picking interesting niches, such as emerging market credits or particular slivers of credit risk along the ratings spectrum, in favor of broad bond benchmarks, Mazza says.
Last year, financial markets showed signs of healing, surprisingly to the upside, and 2013 is likely to be a bit better in terms of global growth than was 2012, Mazza says. It’s also the year of the 20th anniversary for SSgA’s SPDR S&P 500 ETF (NYSEArca: SPY), the first U.S.-listed ETF and now the world’s biggest. It’s a fitting celebration considering the $132 billion fund that started it all appears to be more relevant than ever.
IndexUniverse: What do ETF investors need to be looking out for in 2013? In broad terms, what are some of the key themes or pressing issues you think should be on investors’ radars?
Mazza: There are a couple components that are important here. First, looking back, 2012 was a year that went surprisingly well for many investors if you think that we started off very bearish on Europe, and with a lot of uncertainties in the marketplace—many of which are still lingering. And what we saw in 2012 was an ample amount of liquidity provided by central banks and by policymakers, which, while it was painful from a volatility standpoint, allowed many investors to get some of those “worst-case scenarios” off the table.
Now, when we think about moving into 2013, we do expect global growth to pick up relative to 2012—to about 3.5 percent, which is an improvement from the 3.1 percent seen last year. We also expect to continue to see divergences around the developed world. The U.S. will grow somewhat robustly, at a relative basis of 2 percent. But even within the eurozone, where we should see “flat-ish” growth of about 0.3 percent, markets like Germany, France and Italy will see big divergences: Germany will grow about 1.2 percent, France will grow about 0.6 percent and Italy will remain in a recession. That’s something investors need to bear in mind: Even in a market we tend to look at in a cohesive way, there will be different dynamics at play on a country level.
We tend to look at the world from a scenario-type perspective, and in that sense, it will be particularly important for investors to keep focused on where opportunities may be from a bull/bear case and base case throughout the year, and more specifically, how they may need to, at the margin, be tweaking their portfolios to take advantage of some of those macroeconomic drivers that are permeating the marketplace.
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