Home Adviser Fund Update State Street Enters Fee-War Fray Published October 20, 2017 State Street Enters Fee-War Fray Regular readers know we’ve been following the ongoing competition between fund giants to claim the lowest-cost exchange-traded fundsA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index. (ETFs)A type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index. for years. In the past decade, the popularity of Vanguard’s low-cost options has led its peers into a fight for bragging rights as expense ratios get closer to zero. A new entrant entered the fee wars this week when State Street Global Advisors (SSGA) introduced the SPDR Portfolio ETFsA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index., a new line of 15 low-cost domestic and international equityThe amount of money that would be returned to shareholders if a company’s assets were sold off and all its debt repaid. and U.S. bondA financial instrument representing an IOU from the borrower to the lender. Bond issuers promise to pay bond holders a given amount of interest for a pre-determined amount of time until the loan is repaid in full (otherwise known as the maturity date). Bonds can have a fixed or floating interest rate. Fixed-rate bonds pay out a pre-determined amount of interest each year, while floating-rate bonds can pay higher or lower interest each year depending on prevailing market interest rates. ETFs. The move is a rebranding of existing ETFs that have received new names and tickers, including three that will follow new indexes. The ETFs will have expense ratios that range from 0.03%–0.11%, putting them equal or lower than existing lowest-fee options on the market. As a reminder, expense ratios are what a shareholder pays to support the firm’s annual operating costs for a fund or ETFA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index.. It is derived by dividing annual operating expenses by the average dollar value of the investment vehicle’s assets under management. As of September 29, 2017, the existing SPDR funds held a combined $11 billion in assets and are traded actively, so they were able to seamlessly start trading under their new branding. The international equity funds saw significant price reductions, notably the emerging markets offering, where fees were reduced from 0.59% to 0.11%, undercutting costs of similar options at Schwab, PowerShares, Vanguard and iShares. As mentioned, three of the ETFs will jettison well-known Russell indexes in favor of in-house State Street Global Advisors indexes covering the total U.S. market as well as the large-cap and small-cap spaces. The move will allow SSGA to forego Russell’s licensing fees, helping to keep expenses lower. While we’ve built our business on our conviction that top active managers can outperform the market over meaningful time periods—as well as our own ability in finding those managers—we’re encouraged by moves that allow investors to keep more of the money they earn on their investments. As the low-cost mantra is taken up by more and more of the passive fund marketplace, we’ll be watching to see how actively managed funds follow suit to remain competitive. Fidelity Bond-Manager Shuffle Earlier this month, Fidelity announced several changes to its fixed income management team, effective October 2, 2017. Dave DeBiase has succeeded Robin Foley as co-manager of the Intermediate BondA financial instrument representing an IOU from the borrower to the lender. Bond issuers promise to pay bond holders a given amount of interest for a pre-determined amount of time until the loan is repaid in full (otherwise known as the maturity date). Bonds can have a fixed or floating interest rate. Fixed-rate bonds pay out a pre-determined amount of interest each year, while floating-rate bonds can pay higher or lower interest each year depending on prevailing market interest rates. fund, joining 30-year Fidelity vet Rob Galusza at the helm. DeBiase is stepping up from a position on the firm’s fixed-income trading desk, where he handled trading and analyzed mortgage-backed securities and corporate bondsA financial instrument representing an IOU from the borrower to the lender. Bond issuers promise to pay bond holders a given amount of interest for a pre-determined amount of time until the loan is repaid in full (otherwise known as the maturity date). Bonds can have a fixed or floating interest rate. Fixed-rate bonds pay out a pre-determined amount of interest each year, while floating-rate bonds can pay higher or lower interest each year depending on prevailing market interest rates.. He joined Fidelity in 2006 and has been in the industry since 2000. Julian Potenza has taken Foley’s co-managerial role alongside Galusza on Short-Term Bond, Series Short-Term Credit, Advisor Series Short-Term Credit and Flex Short-Term Bond. He was also appointed co-manager on Conservative Income Bond, which he’ll oversee with Galusza and Rob Chan. Potenza previously acted as a research analyst focused on broad themes and asset allocation strategy for Fidelity’s investment-grade bond and money market strategies. He began his Fidelity career in 2007 and has worked in the industry since 2003. At the same time, Fidelity named Celso Munoz as co-manager on Total Bond, working with lead manager Ford O’Neil and co-managers Matt Conti, Mike Foggin and Jeff Moore. Munoz is also a co-manager of Series Investment Grade Bond, VIP Investment Grade Bond Portfolio and Total Bond ETF, where his responsibilities will not change. He has previously worked as a research analyst for the firm, where his experience included the insurance and pharmaceuticals industries. He joined Fidelity in 2005 and has worked in the industry since 1999. Vanguard’s Global Balanced Funds Open In July, we covered Vanguard’s plans to partner with Wellington Management to offer global versions of two of its long-running and highly popular actively managed balanced funds. This week, Global Wellington and Global Wellesley Income began two-week subscription periods, which will end November 1, after which they will begin following their investment strategies. You can read our write-up on the funds by clicking here. As mentioned in our July piece, the funds will come in both Investor and Admiral share classes, with $3,000 and $50,000 investment minimums, respectively. About Adviser Investments Adviser Investments is a full service wealth management firm, offering investment management, financial and tax planning, managed individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trustsA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process., institutions and foundations since 1994, and have more than 3,500 clients across the country and over $6 billion in assets under management. Our portfolios encompass actively managed funds, ETFs, socially responsible investments and tactical asset allocation strategies, with particular expertise in Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. Our minimum account size is $350,000. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868. 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