SSGA introduces euro-hedged share class on S&P 500 ETF

Nov 7th, 2018 | By | Category: Equities

State Street Global Advisors has introduced a euro-hedged share class for its SPDR S&P 500 ETF on Deutsche Borse and Borsa Italiana.

SPDR ETFs launches low-cost euro-hedged S&P 500 share class

The SPDR S&P 500 EUR Hdg UCITS ETF is now the cheapest ETF available in Europe to offer euro-hedged exposure to the S&P 500.

With a total expense ratio (TER) of just 0.12%, the SPDR S&P 500 EUR Hdg UCITS ETF becomes the lowest cost euro-hedged S&P 500 ETF in Europe.

Lyxor was previously the firm to beat in this space with its euro-hedged S&P 500 ETF priced at 0.15%.

According to SSGA, the new share class may appeal to investors who remain bullish on US equities following the outcome of the recent US midterm elections, but are worried about an appreciation in EUR/USD eroding returns.

Antoine Lesne, head of SPDR ETF Research & Strategy EMEA at State Street, commented, “As interest rates have diverged over the last few years, causing a relative weakness in the EUR/USD, a EUR investor would have been better off going long on the S&P 500 on an unhedged basis.

“However, if the European Central Bank acts as expected, and we see a convergence of rates, coupled with a strengthening EUR, this trend is likely to reverse. If this is the case, European investors may be better off hedging their S&P 500 exposure using a EUR hedged index.”

SPPE tracks the recently launched S&P 500 EUR Dynamic Hedged Index which is based on a transparent hedging methodology that adheres to UCITS regulations. The hedge is achieved using forward foreign exchange contracts and is rebalanced on a monthly basis. Hedging is monitored continually to ensure that fund over- or under-hedged positions do not exceed 105% or fall below 95% of the fund’s NAV respectively.

The new share class is listed on the Deutsche Borse (SPPE GY) and Borsa Italiana (SPXE IM) in euros.

SSGA’s original unhedged version of the fund costs 0.09% and houses around $3.6 billion in AUM.

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