State Street Global Advisors, the second-largest ETF provider by assets, filed paperwork with U.S. regulators updating its registration statement for three actively managed ETFs, two of which expand on a global allocation strategy SSgA launched in April, and the other an actively managed senior loan portfolio.
The firm first put these ETFs into the regulatory pipeline in the spring of 2011 in a filing that detailed six actively managed ETFs, three of which SSgA launched in April of this year.
Now, it’s providing more details—such as tickers and fees—on the SPDR SSgA Conservative Global Allocation ETF (NYSEArca:CNSA) and the SPDR SSgA Aggressive Global Allocation ETF (NYSEArca:AGRA), both of which will serve up different takes on the SSgA Global Allocation ETF (GAL).
The third fund it detailed in the latest filing was the SPDR Blackstone/GSO Senior Loan ETF (NYSEArca:SRLN), which will enter a crowding field dominated by a nearly $1.2 billion index strategy, the PowerShares Senior Loan Portfolio.
Global Allocation Strategies
By and large, SSgA’s global allocation strategies are designed to give investors an alternative to a traditional bond portfolio as a way of capturing higher returns at a time when inflation is outpacing the ultra-low yields found in traditional bond strategies.
SSgA’s GAL, the firm’s first actively managed ETF launched in April , serves up “balanced” exposure to global equity and debt, with the fund typically allocating 60 percent to equities, according to the fund’s prospectus. GAL has gathered $6 million in assets since inception.
The soon-to-be-launched CNSA and AGRA are designed similarly to generate current income and capital preservation through a broad basket that taps into equities and bonds, but they each offer a different level of exposure to volatility.
CNSA, for instance, allocates more to fixed income than to equities as it looks to mitigate volatility—roughly 60 percent of the fund is expected to be tied to domestic and international debt securities. AGRA, on the other hand, will allocate some 80 percent of its portfolio to equities.
CNSA and AGRA will cost 0.35 percent, the same as GAL’s price tag.
Another Competitor In The Senior Loan Space
SSgA, as noted, is also looking to throw its hat in the ring with its own take on a senior loan portfolio, although unlike its competitors, this fund is actively managed.
The SPDR Blackstone/GSO Senior Loan ETF (NYSEArca:SRLN), which has annual fees of 0.90 percent, is designed to outperform the S'P/LSTA U.S. Leveraged Loan 100 Index through a portfolio that is roughly 80 percent allocated to senior loans primarily made to businesses operating in North America.
SRLN would join not only the 18-month-old PowerShares Senior Loan Portfolio (BKLN)—the first ETF to serve up direct access to senior loans—but also the soon-to-be-launched Pyxis/iBoxx Senior Loan ETF (SNLN). That fund’s launch was postponed due to Hurricane Sandy’s impact on the markets.
Senior loans generally have risk profiles that are similar to below-investment-grade securities. What sets them apart is that they have a right to payment before most other debts a borrower has. That means senior loans have higher recovery rates than other below-investment-grade debt should a company default on debts.
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