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SSgA Launches Its First Active ETFs
By Alex Ulam | 26 April, 2012

[This article previously appeared on our sister site,]

State Street Global Advisors (SSgA), the fund sponsor behind the SPDR ETFs, today launched its first three actively managed ETFs in the United States, marking its entry into a niche of the market that is drawing increasing attention from major ETF providers.

The three new funds represent half of the six active funds SSgA originally filed for last April. The funds coming out today emphasise inflation-protected asset allocation strategies. The investment approaches that are described in the prospectus include using exchange-traded products, most of which are index securities.

The three new funds, their tickers and expense ratios are as follows:

  • SPDR SSgA Multi-Asset Real Return ETF (NYSEArca: RLY) comes with a total net expense ratio of 0.70 percent. This fund seeks both capital appreciation and current income through investment in exchange-traded products that include securities focused on inflation protection; real estate; commodities; and companies in the natural resources space.
  • SPDR SSgA Income Allocation ETF (NYSEArca: INKM) comes with a total net expense ratio of 0.70 percent. This ETF is a total return fund focusing on income- and yield-generating assets including US and international equities; debt securities; debt/equity hybrids such as preferred stocks and convertible bonds; as well as real-estate securities.
  • SPDR SSgA Global Allocation ETF (NYSEArca: GAL) comes with a total net expense ratio of 0.35 percent. The fund seeks current income and capital preservation, with a secondary emphasis on capital appreciation. The active ETF will provide “balanced exposure” to US and international debt and equity, with the balance shifting over time.
More than 99 percent of the US$1.174 trillion in assets under management are in passive funds and a good portion of the active ETF money actually is in one fund, the US$1.56 billion Pimco Enhanced Short Maturity Strategy Fund (NYSEArca: MINT). Active funds, which depend upon an advisor’s acumen for their performance, generally have produced disappointing performance in comparison to passively managed ETFs, which track an index, as Standard & Poor’s SPIVA report rarely fails to show.

However, ETF giants such as iShares, which just won regulatory approval last March to develop active ETFs, are building out the active space with a variety of funds, many of which are oriented toward the more illiquid bond market that generally presents more challenges to passively managed funds.

One of the distinguishing aspects of the new SSgA funds is that they add an active management element to the asset allocation space, an arena generally dominated by passive funds, which focuses on diversified exposure schemes to capture growth and income in the long run. Currently, there only are 27 asset allocation ETFs out of more than 1,400 US-listed ETFs, according to IndexUniverse’s “ETF Fund Finder.”

Several weeks ago, AdvisorShares filed paperwork to bring to market an actively managed ETF similar to the SSgA funds.

The AdvisorShares Pring Turner Dow Jones Business Cycle ETF (NYSEArca: DBIZ) will own everything from US and foreign equities to high-quality corporate debt to other ETFs and ETNs, keeping its asset class and sector allocations flexible to reflect the market’s changing business cycle.


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Larry Swedroe

S&P’s SPIVA report for Europe compares active managers to their benchmarks