State Street Enters Fee-War Fray
Regular readers know we’ve
the ongoing competition
between fund giants to claim the lowest-cost exchange-traded funds (ETFs) 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 ETFs, a new line of 15 low-cost domestic and international equity and U.S. bond 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 ETF. 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 Bond 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 bonds. 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 operates as an independent, professional wealth management firm with expertise in Fidelity and Vanguard funds, actively managed mutual funds, ETFs, fixed-income investing, tactical strategies and financial planning. Our investment professionals focus on helping individual investors, trusts, foundations and institutions meet their investment goals. Our minimum account size is $350,000. For the fifth consecutive year, Adviser Investments was named to Barron’s list of the top 100 independent financial advisers nationwide and its list of the top advisory firms in Massachusetts in 2017. We have also been recognized on the Financial Times 300 Top Registered Investment Advisers list in 2014, 2015 and 2016.
For more information, please visit www.adviserinvestments.com or call 800-492-6868.
Disclaimer: This material is distributed for informational purposes only. The investment ideas and expressions of opinion may contain certain forward-looking statements and should not be viewed as recommendations, personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.
Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged.
Past performance is not an indication of future returns. The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. We do not provide legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
The Barron’s rankings consider factors such as assets under management, revenue produced for the firm, regulatory record, quality of practice and philanthropic work. This award does not consider client experience and is not indicative of future performance.
Editors at the Financial Times bestowed “elite” status on 300 firms in the U.S., as determined by assets under management, asset growth, longevity, compliance record, industry certifications and online accessibility.
© 2018 Adviser Investments, LLC. All Rights Reserved.