State Street Global Advisors, the No. 2 U.S. ETF provider by
assets, filed regulatory paperwork proposing two TIPS
-a 0- to 5-year fund and a 1- to 10-year fund-in hopes to expand
its reach into inflation-protected investment vehicles at a time of
heightened concern about mounting inflationary pressures.
The two funds in this filing-the SPDR Barclays 0-5 Year TIPS ETF
and the SPDR Barclays 1-10 Year TIPS ETF-would land on the short-
and midterm maturation scale, as TIPS are issued with five-, 10-
and 20-year maturity dates, heightening appeal to investors looking
for tools to manage inflation over time.
TIPS-Treasury inflation-protected securities-hedge against
inflation by adjusting principal based on movements of the consumer
price index (
), one of the more popular benchmarks used to gauge inflation. If
the CPI increases, principal payments from the issuer rise in kind
to counteract the corrosive effects of inflation on bond returns.
They're also backed by the U.S. government, obviating credit
A fair amount of anxiety is coursing through financial markets
that all of the Federal Reserve's easy-money policies designed to
make borrowing cheaper and economic growth more possible in the
wake of the 2008 crash will create inflationary pressures in the
macroeconomy the likes of which the global economy hasn't seen
since perhaps the 1970s.
TIPS are very liquid bonds, allowing for relatively cheap
expense ratios. SSgA hasn't yet declared an expense ratio for
either of these funds, but SSgA's one existing TIPS ETF-the SPDR
Barclays TIPS Fund (NYSEArca:IPE)-has an expense ratio of just 18
basis points, or $18 for each $10,000 invested. IPE has $760
million in assets under management.
There are currently 11 TIPS ETFs on the market, which pulled in
$1.88 billion altogether over the past year, according to
IndexUniverse data. The largest TIPS fund is the iShares Barclays
TIPS Bond fund (NYSEArca:TIP), with $22 billion in total assets,
making it the second-biggest bond ETF after the $24 billion iShares
iBoxx $ Investment Grade Corporate Bond Fund (NYSEArca:LQD).
Short-term TIPS funds on par with the two in SSgA's filing
include the FlexShares iBoxx 5-Year Target Duration TIPS ETF
(NYSEArca:TDTF), with $420 million in assets; and the Vanguard
Short-Term Inflation-Protected Securities fund (NYSEArca:VTIP),
which holds $189 million in assets and has a competitive expense
ratio of just 10 basis points, making it a formidable opponent for
the SPDR Barclays 0-5 Year TIPS ETF if and when that fund hits the
The funds in this filing don't yet have tickers, but SSgA did
say both will have their primary listings on Arca, the New York
Stock Exchange's electronic trading platform.
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