State Street Global Advisors, the second-largest ETF provider in
the U.S., on Tuesday is bringing to market a "me-too" equities ETF
built around the Russell 2000 Index of small-cap stocks, a popular
pocket of the investment universe dominated by the huge iShares
Russell 2000 ETF (NYSEArca:IWM).
The SPDR Russell 2000 ETF (NYSEArca:TWOK) will track through
representative sampling the broad benchmark comprising U.S.
small-cap stocks. The strategy is vastly similar to the approach
iShares, Vanguard and Charles Schwab, to name a few, have taken to
tap into the small-cap universe through various benchmarks.
IWM is the largest fund in a small-cap segment comprising nearly
20 funds. Its $23.3 billion in assets have been gathered over a
13-year period-and it has roughly twice the assets of its nearest
It's hard to imagine exactly how State Street will chip away at
IWM's market share, unless it's looking to aggressively compete on
price. But the latest prospectus filed with regulators didn't
disclose TWOK's planned fees, and company officials declined to
comment on the price and its plans for the fund until it starts
IWM costs 0.24 percent, or $24 per $10,000 invested, but it's
not the cheapest ETF in the small-cap U.S. equities space. That
distinction goes to the Schwab U.S. Small Cap ETF (NYSEArca:SCHA),
which costs 0.08 percent, or $8 per $10,000 invested. The Vanguard
Small-Cap ETF (NYSEArca:VB) costs 0.10 percent.
It's unclear why State Street would add this fund to its lineup
now. It could be that the firm is looking to expand its growing
roster of Russell-linked
so that clients that favor Russell indexes will be able to find
them within the State Street stable of exchange-traded funds.
'The launch of TWOK by itself seems like a me-too product, but
if it's viewed in the context of the scheduled name/ticker/index
changes of three existing funds, you can see it as part of a shift
away from Dow Jones indexes to Russell,' IndexUniverse ETF analyst
Howard Lee said.
'When it's all said and done, State Street will be providing a
full suite of Russell ETFs,' he said.
In question are three ETFs that were to drop their Dow Jones
indexes and tickers sometime around the end of June for Russell
indexes instead. The changes will still take place, according to a
statement SSgA filed with regulators in April, but were postponed
to coincide with the launch of TWOK. They are:
- The SPDR Dow Jones Total Market ETF (NYSEArca:TMW) will
become the SPDR Russell 3000 ETF (NYSEArca:THRK).
- The SPDR Dow Jones Large Cap ETF (NYSEArca:ELR) will become
the SPDR Russell 1000 ETF (NYSEArca:ONEK).
- The SPDR Dow Jones Mid Cap ETF (NYSEArca:EMM) will become the
SPDR Russell Small Cap Completeness ETF (NYSEArca:RSCO).
TWOK, along with the index changes in these three funds
certainly help SSgA round out its Russell-based ETF offerings-some
of which are tied to benchmarks first used for Russell ETFs that
were shuttered last summer.
For example, in February, State Street launched the SPDR Russell
2000 Low Volatility ETF (NYSEArca:SMLV), with an expense ratio of
0.25 percent. It first appeared as a Russell-branded ETF that
traded under the symbol "LVOL."
There's also the view that U.S. small-cap stocks have been a
popular segment with investors, who have watched IWM tack on gains
of more than 19 percent so far this year, after climbing 25 percent
Since July 1, IWM has attracted nearly $1 billion in net new
assets, putting total year-to-date net inflows at $3.62 billion,
according to data compiled by IndexUniverse.
SSgA also sponsors three S&P 600-based small-cap ETFs that
dissect the space through growth and value metrics.
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