SSGA cuts fees on high-yield and MBS ETFs to record low

Mar 25th, 2021 | By | Category: Fixed Income

State Street Global Advisors (SSGA) has reduced the fees charged on two US-domiciled, NYSE Arca-listed core fixed income ETFs targeting high-yield and mortgage-backed securities.

Noel Archard, global head of SPDR product at SSGA

Noel Archard, global head of SPDR product at SSGA

The expense ratio on the $290 million SPDR Portfolio High Yield Bond ETF (SPHY US) has been lowered from 0.15% to 0.10%, while the $3.4 billion SPDR Portfolio Mortgage Backed Bond ETF (SPMB US) has been trimmed from 0.06% to 0.04%.

Following the fee cuts, the funds are now the lowest-cost ETFs in their respective categories.

Noel Archard, Global Head of SPDR Product at SSGA, commented:  “We are always reviewing our low-cost suite of SPDR Portfolio ETFs for opportunities to reduce the total cost of ownership for investors.

“Designed to help clients build a strong, low-cost core, SPDR Portfolio ETFs have attracted more than $65bn of asset flows since debuting less than four years ago which is a testament to the suite’s compelling value.”

The SPDR Portfolio High Yield Bond ETF tracks the ICE BofA US High Yield Index which consists of fixed-rate, non-investment-grade corporate debt issued in US dollars within the US domestic market. Eligible issues must have at least $250m outstanding and a remaining time to maturity greater than one year.

The fund’s low price tag makes it a compelling alternative to the largest high-yield bond ETF on the market, the $21.3bn iShares iBoxx $ High Yield Corporate Bond ETF (HYG US), which comes with an expense ratio of 0.49%. This fund tracks the Markit iBoxx USD Liquid High Yield Index.

The SPDR Portfolio Mortgage Backed Bond ETF, meanwhile, is linked to the Bloomberg Barclays US MBS Index which measures the performance of investment-grade US agency mortgage pass-through securities.

By lowering the fund’s expense ratio, SSGA will no doubt be hoping to wrest some market share from the largest US MBS ETF, the $26.5bn iShares MBS ETF (MBB US), which tracks the same index and is priced at 0.06%.

SSGA introduced its first SPDR Portfolio ETFs in October 2017 by rebranding and lowering expense ratios on 15 pre-existing funds. In September 2019, the suite was expanded to include a further seven ETFs.

The ETFs, which come with expense ratios ranging from 0.03% to 0.12%, deliver a range of equity (US, global, global ex-US, Europe, and emerging markets) and fixed income (Treasury, TIPS, corporate, high yield, mortgage-backed, and aggregate) exposures.

Collectively, the suite houses over $92 billion in assets.

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