Markets

SSgA Plans Emerging, All-World ETFs

State Street Global Advisors, the fund provider behind the SPDR ETFs, filed paperwork to market two equities ETFs, one a subset of the two largest funds in the emerging markets space, and the other a blend of developed and emerging equities.

The SPDR MSCI EM 50 ETF will track a free-float-adjusted market-capitalization-weighted MSCI index that picks the 50 largest names in the MSCI Emerging Markets Index, the benchmark used by the iShares MSCI Emerging Markets Index Fund (NYSEArca:EEM) and the Vanguard MSCI Emerging Markets ETF (NYSEArca:VWO).

Its other fund, the SPDR MSCI ACWI IMI ETF, will invest in equities from both developed and emerging markets by tracking an MSCI index that cover some 98 percent of the global equities investable universe, with a focus on the larger names as measured by free-float-adjusted market capitalization.

SSgA already sponsors ETFs that target emerging market equities, including the SPDR S'P Emerging Markets ETF (NYSEArca:GMM). GMM has gathered $139 million in assets since its 2007 inception, a far cry from EEM and VWO, which have amassed $33 billion $44 billion, respectively.

The company’s developed economy plays include the SPDR MSCI ACWI ex-US ETF (NYSEArca:CWI), which has gathered $390 million in assets in nearly five years.

Both of the proposed funds will use sampling strategies, meaning they won’t own all the securities in their respective indexes.

Portfolio Composition

In its emerging markets fund, SSgA looks to minimize the number of countries and currencies included in the portfolio by selecting only those countries that represent more than 3 percent of the broader index.

The strategy makes an exception for countries that, while failing to meet the 3-percent-weight threshold, have two or more securities that rank in the top 50 companies by free-float-adjusted market capitalization, the filing said.

Liquidity screens also apply. Additionally, exposure to Brazil, India, Mexico and Russia will be done through depositary receipts, while components such as real estate trusts and China B shares will be excluded.

By comparison, the company’s other broad-based ETF in the emerging markets space, GMM, excludes Korea and has a heavier focus to BRIC countries—Brazil, Russia, India, China.

For its blended developed and emerging portfolio, SSgA will also screen for liquidity, and focus on the larger names in the space.

Mutual funds, ETFs, equity derivatives, limited partnerships and most investment trusts are excluded from the mix, the filing said.

Both indexes underlying each new ETF are reviewed quarterly.

SSgA didn’t disclose any tickers or fees in the filing.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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