SSGA introduces euro-hedging for US dividend and EM govies ETFs

Jun 17th, 2019 | By | Category: ETF and Index News

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State Street Global Advisors (SSGA) has introduced currency-hedged versions of two of its ETFs on Deutsche Börse Xetra.

SSGA introduces euro-hedging for US dividend aristocrat and EM government bond ETFs

The funds allow investors to hedge their currency exposure relative to the euro.

The new funds allow investors to gain exposure to US firms with sustainable dividends and to short-term emerging market government debt while hedging international currency exposures relative to the euro.

US sustainable dividends

The SPDR S&P US Dividend Aristocrats EUR Hdg UCITS ETF (SPPD GY) is linked to the S&P High Yield Dividend Aristocrats EUR Dynamic Hedged Index which includes stocks of the S&P Composite 1500 Index that have increased dividends every year for at least 20 consecutive years.

This selection process is designed to help investors to avoid ‘dividend traps’, where a stock’s dividend yield looks attractive but the firm’s fundamentals are not able to support the payouts in the long-term, leading to a reduction or scrapping of the dividend.

Constituents are weighted by annual dividend yield subject to a 4% cap per stock. The index is reconstituted annually in January and rebalanced quarterly.

The ETF comes with an expense ratio of 0.40%. Distributions are sent to investors on a quarterly basis.

The unhedged version of the fund – the SPDR S&P US Dividend Aristocrats UCITS ETF (SPYD GY) – is priced at 0.35% and houses nearly $3.0 billion in AUM.

Emerging market bonds

The SPDR ICE BofAML 0-5 Year EM USD Government Bond EUR Hdg UCITS ETF (ZPR6 GY) is linked to the ICE BofAML 0-5 Year EM USD Government Bond ex-144a EUR Dynamic Hedged Index. The index covers US dollar-denominated emerging markets government debt issued in the US domestic market. Bonds must have a remaining maturity under five years to be eligible for inclusion.

The index is currently yielding 4.4% and has an effective duration of 2.5 years. Two-fifths of the index is allocated to bonds rated high yield, while, within investment grade, the largest categories of holding are Baa (26.2%), A (14.7%), and Aa (17.5%). The largest country exposures are to South Korea (6.4%), Turkey (5.9%), Indonesia (5.9%), Qatar (5.6%), and China (5.2%).

The fund comes with an expense ratio of 0.47%. Income is accumulated within the portfolio.

The unhedged SPDR ICE BofAML 0-5 Year EM USD Government Bond UCITS ETF (ZPR5 GY) costs 0.42% and has $200m AUM.

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