State Street Unveils Big Smart Beta Expansion

One of the many certainties in the world of exchange traded funds is that smart or strategic beta funds are driving ETF industry growth. Another certainty, confirmed by data, is that nearly all users of smart beta funds intend to main or increase that exposure in the future.

There is growing demand for fundamental strategies and ETF issuers are meeting that demand. Count State Street Global Advisors (SSgA), the third-largest U.S. ETF issuer, among that group. SSgA unveiled a significant expansion to its smart beta lineup with the recent debuts of the SPDR Russell 1000 Momentum Focus ETF ONEO, SPDR Russell 1000 Yield Focus ETF ONEY and the SPDR Russell 1000 Low Volatility Focus ETF ONEV.

“The ETFs are designed to track the performance of rules based indexes from FTSE Russell. The Russell 1000 Focus ETFs are designed for investors who want to tailor their specific risk and return objectives while maintaining a core position within US equities. The objectives include looking for yield (ONEY), growth potential (ONEO) or low volatility (ONEV). With the addition of the three new focused factor ETFs, SSGA’s smart beta product offerings now total $81 billion in AUM,” said SSgA in a statement. 

SSgA developed the new ETFs with the Alaska Permanent Fund Corporation (APFC), which spread over $1 billion across the three rookie ETFs, making each among the most successful new ETFs to come to market this year. Put simply, the SPDR Russell 1000 Yield Focus ETF is currently the smallest of the three new ETFs with $335.5 million in assets under management. With $1.5 billion in assets under management, SSgA's SPDR DoubleLine Total Return Tactical ETF TOTL is the most successful ETF to come to market this year.

The SPDR Russell 1000 Momentum Focus ETF follows the Russell 1000 Momentum Focused Factor Index and holds 925 stocks. Consumer discretionary is the new ETF's largest sector weight at 22.7 percent while producer durables and financial services combine for over a third of the fund's weight. None of the ETF's holdings command weights north of 0.92 percent. Top 10 holdings include Southwest Airlines Co. LUV and Bed, Bath & Beyond Inc. BBBY.

The SPDR Russell 1000 Low Volatility Focus ETF tracks the Russell 1000 Low Volatility Focused Factor Index and holds 424 stocks. Investors expecting this ETF to be heavy on utilities stocks could be surprised to learn utilities are merely ONEV's fifth-largest sector weight. Financial services, consumer discretionary, producer durables and consumer staples command more of ONEV's lineup than do utilities.

The SPDR Russell 1000 Yield Focus ETF follows the Russell 1000 Yield Focused Factor Index. As a yield play, it is not surprising to this new ETF dedicate nearly 13 percent of its weight to utilities stocks, making that group ONEY's fourth-largest sector weight. Financial services, consumer discretionary and producer durables are ONEY's top three sector allocations.

Home to 305 stocks, ONEY's top 10 holdings include National Oilwell Varco Inc. NOV and Occidental Petroleum Corp. OXY.

“Smart Beta equity ETFs/ETPs listed globally gathered US$ 3.0 billion in new assets in October and US$ 53.7 billion in the first 10 months of 2015. There were 764 smart beta equity ETFs/ETPs, with 1,336 listings, assets of US$399 billion, from 106 providers listed on 31 exchanges in 27 countries, according to ETFGI’s new report the Global Smart Beta ETF and ETP Insights report for October 2015,” according to ETFGI, a London-based ETF research firm.

All three of the new ETFs charge 0.2 percent per year, or $20 for every $10,000, which is inexpensive among smart beta funds.