State Street Global Advisors, the company behind the worldâs two largest ETFs, today launched two fixed-income ETFs, one carving a new niche for the company in the increasingly popular floating-rate bond space, and the other focused on the short-term end of the U.S. Treasurys market.
The SPDR Barclays Capital Investment Grade Floating Rate ETF (NYSEArca:FLRN) is SSgAâs first floating-rate bond ETF, but the fund will face competition from other offerings, including the $59 million iShares Floating Rate Note Fund (NYSEArca:FLOT), which tracks the same Barclays Capital benchmark underlying FLRN.
SSgA said on its website that the fund comes with an annual expense ratio of 0.15 percent, while FLOT from iShares costs 0.20 percent.
SSgA is the latest to join the growing market for floating-rate debt ETFs, which came into vogue earlier this year following the launch of the PowerShares Senior Loan Portfolio (NYSEArca:BKLN). BKLN, which focuses on noninvestment-grade bank loans, has attracted $166 million in eight months.
Since then, other companies such as iShares and New York-based Van Eck have followed suit, with the launch of similar products that include iSharesâ FLOT and the seven-month-old $9.5 million Market Vectors Investment Grade Floating Rate ETF (NYSEArca:FLTR).
FLRN will consist of U.S. dollar-denominated, investment-grade floating-rate notes with maturities of at least a month and less than five years. Floating-rate bonds are usually issued for recapitalization needs as well as acquisitions, so they are typically tied to borrowers who are highly leveraged.
Adding To The US Treasurys Curve
SSgAâs other launch today is the SPDR Barclays Capital Short Term Treasury ETF (NYSEArca:SST). The fund will own short-term U.S. Treasurys by tracking the market-capitalization-weighted Barclays Capital 1-5 Year U.S. Treasury Index.
SST will employ a representative sampling, meaning it wonât own all the funds in the indexâa common strategy, since fixed-income indexes are usually vast and many of the securities in the indexes arenât terribly liquid.
SSTâs expense ratio will be 0.12 percent, according to SSgAâs website.
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