A New Low-Cost Sheriff In ETF Town

When it comes to low fees in the world of exchange-traded funds, many investors think of Charles Schwab Corp SCHW and Vanguard. Other ETF sponsors have shown a willingness to tussle on costs, but State Street Corp STT's State Street Global Advisors (SSgA) unit, the third-largest U.S. ETF issuer, is ready to be recognized as a low-cost leader.

While some of SsgA's largest ETFs, including the SPDR S&P 500 ETF SPY and sector ETFs such as the Financial Select Sector SPDR XLF can be considered inexpensive, the issuer lagged behind rivals when it came to really cheap ETFs. That changed Monday when SsgA unveiled a suite of 15 ultra-low cost ETFs with fees ranging from just 0.03 percent per year to 0.11 percent.

The 15 funds in SPDR Portfolio ETFs suite are previously existing products from the SSgA, some of which have been switched to in-house indexes to help lower costs. Several of the funds are transitioning away from FTSE Russell equity indexes and Bloomberg Barclays fixed income benchmarks.

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Going Low

Several State Street ETFs that previously tracked FTSE Russell indexes and charged 0.1 percent per year have been renamed and will feature expense ratios ranging from just 0.03 percent to 0.05 percent annually, placing those funds among the cheapest in their respective categories.

The SPDR S&P 500 Growth ETF SPYG and the SPDR S&P 500 Value ETF SPYV are now charging 0.04 percent annually, down from 0.15 percent while the SPDR S&P 500 High Dividend ETF SPYD saw its fee trimmed to 0.04 percent per year from 0.12 percent. All three of those funds are now among the cheapest smart beta ETFs in the U.S.

“Demand for low-cost ETFs has accelerated in recent years, as advisors and investors have replaced mutual funds in asset allocation models or shifted to buying ETFs from commission free platforms. SSGA has lost market share to iShares, Vanguard and Schwab as its more expensive products were not well suited to a fee-based approach,” said CFRA Research director of ETF & mutual fund research Todd Rosenbluth in a note out Monday. 

More Savings

For ultra-frugal investors, there is more good news associated with the SPDR Portfolio ETFs.

Monday's “launch of SPDR Portfolio ETFs coincides with the launch of TD Ameritrade’s newly expanded ETF Market Center. The 15 SPDR portfolio ETFs will all be available to purchase commission free on TD Ameritrade’s ETF Market Center,” said State Street.

Disclosure: The author owns shares of XLF.