State Street Global Launches a Handful of Fixed Income ETFs 2 comments
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At the start of this year, Barclays Global Investors [BGI] was the only company to offer fixed income ETFs, providing just five funds. Since January 1, BGI has launched eleven new fixed income ETFs; Vanguard has added four funds of its own; and Ameristock Funds has registered for its own line-up of fixed income ETFs.
Now, SSgA is jumping into the mix, with a line-up that focuses primarily on Treasuries. The five new SSgA funds are:
Of all the new funds, the most interesting may be the 1-3 month T-Bill fund (BIL). Short-term bond ETFs have been a surprise hit with investors. The iShares Lehman Short Treasury Bond Fund (SHV), for instance, has been far-and-away the fastest growing of the new iShares fixed income ETFs, pulling in nearly $200 million in assets in its first four months on the market, compared to just $20-$40 million for most of the other funds. The same is true of the Vanguard Short-Term Bond ETF (BSV), which has outpaced the other Vanguard bond ETFs, pulling in $120 million since launch.
Common sense suggests that much of this money comes from mutual funds and other holders looking for a quick and liquid way to park cash. With that in mind, what’s interesting about the new SSgA fund is that it is the shortest duration bond ETF on the market: the fund only holds Treasuries with durations of one to three months, compared to 1-12 for BGI’s SHV, and 1-5 years for Vanguard’s BSV.
Will investors search out the short-term access? OR will they be satisfied with the longer-term exposure offered by the Vanguard and SSgA funds. It remains to be seen.
SSgA has taken a middle road with its price points on these ETFs: the funds are substantially cheaper than the BGI fixed income products, but more expensive than the 11 basis points (0.11%) charged by cost-leader Vanguard.
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Separately, I wonder whether Barclays will have to cut the expense ratio on its bond ETFs in reaction to State Street and Vanguard.