State Street Global Advisors (SSgA)*, the asset management business of State Street Corporation (NYSE: STT), today announced that the SPDR BofA Merrill Lynch Crossover Corporate Bond ETF (Symbol: XOVR) and the SPDR BofA Merrill Lynch Emerging MarketsCorporate Bond ETF (Symbol: EMCD) began trading on the NYSE Arca on June 19, 2012. The new SPDR ETFs provide investors with an opportunity to access the attractive yield and total return potential of crossover bonds and emerging market corporate debt.
“The SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF provides investors with an opportunity to tap into the growth potential of emerging markets while minimizing exposure to emerging market currencies”
The SPDR BofA Merrill Lynch Crossover Corporate Bond ETF seeks to track the performance of the BofA Merrill Lynch US Diversified Crossover Corporate Index. The Index is designed to measure the performance of US dollar-denominated BBB and BB corporate debt publicly issued in the US domestic market. “Crossover” corporate debt generally means corporate debt rated at levels where the lower end of investment-grade debt and the higher end of high-yield debt meet. Qualifying securities must be rated BBB1 through BB3 inclusive (based on an average rating of Moody’s Investors Service Inc., Standard & Poor’s Inc and Fitch, Inc.) have a fixed income coupon schedule, have at least one year remaining to final maturity, and a minimum amount of outstanding of $250 million or more of issuance.
Index constituents are segmented into two groups: those rated between BBB1 and BBB3, inclusive, and those rated between BB1 and BB3, inclusive. Within these two groups, issues are capitalization-weighted and each group is assigned a 50 percent weight in the overall index – with a 2 percent cap on each issuer. As of 5/31/2012 approximately 3029 securities were included in the index. The SPDR BofA Merrill Lynch Crossover Corporate Bond ETF’s expense ratio is 0.30 percent**.
“Featuring potentially higher yields than most investment grade bonds and potentially less credit risk than most high yield issues, demand for crossover bonds is growing among financial advisors and investors during this extended low-yield environment,” said James Ross, senior managing director and global head of SPDR Exchange Traded Funds at State Street Global Advisors. “With the launch of the SPDR BofA Merrill Lynch Crossover Corporate Bond ETF, precise, cost-efficient access to this asset class is within reach for investors seeking exposure that spans both investment grade and high-yield bonds.”
The SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF seeks to track the performance of the BofA Merrill Lynch Emerging Markets Large Cap Senior Corporate Index. The Index is designed to measure the performance of U.S. dollar-denominated emerging market corporate senior and secured debt publicly issued in the U.S. domestic market and the Eurobond market. To qualify for inclusion, an issuer must have primary risk exposure to a country other than a member of the G10 (Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, the United Kingdom, and the United States), a Western European country, or a territory of the US.
Individual securities of qualifying issuers must be denominated in US dollars, be senior or secured debt, have at least one year remaining to final maturity, a fixed coupon and $500 million or more in outstanding face value. As of 5/31/2012 approximately 454 securities were included in the index. The SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF’s expense ratio is 0.50%.
“The SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF provides investors with an opportunity to tap into the growth potential of emerging markets while minimizing exposure to emerging market currencies,” said Ross. “As fixed-income portfolio diversification becomes a higher priority for investors, interest in emerging market bond exposure is increasing.”
State Street manages more than $307*** billion in SPDR ETF assets worldwide (as of March 31, 2012) and is one of the largest ETF providers globally.
About SPDR Exchange Traded Funds
SPDR ETFs are a comprehensive family spanning an array of international and domestic asset classes. SPDR ETFs are managed by SSgA Funds Management, Inc., a registered investment adviser and wholly owned subsidiary of State Street Bank and Trust Company. The funds provide professional investors with the flexibility to select investments that are precisely aligned to their investment strategy. Recognized as the industry pioneer, State Street created the first ETF in 1993 (SPDR S&P 500® – Ticker SPY). Since then, we’ve sustained our place as an industry innovator through the introduction of many ground-breaking products, including first-to-market launches with gold, international real estate, international fixed income and sector ETFs. For more information, visit www.spdrs.com.
About State Street Global Advisors
State Street Global Advisors (SSgA) is a global leader in asset management. The firm is relied on by sophisticated investors worldwide for its disciplined investment process, powerful global investment platform and access to every major asset class, capitalization range and style. SSgA is the asset management business of State Street Corporation, one of the world’s leading providers of financial services to institutional investors.
*SPDR ETFs are managed by SSgA Funds Management, Inc., a registered investment adviser and wholly owned subsidiary of State Street Bank& Trust Company.
** The Adviser has contractually agreed to waive its advisory fee and reimburse certain expenses, until October 31, 2015, so that the Net Annual Fund Operating Expenses of the Fund will be limited to 0.30% of the Fund’s average daily net assets before application of any fees and expenses not paid by the Adviser under the Investment Advisory Agreement. Such fees and expenses paid by the Adviser are limited to certain direct operating expenses of the Fund and, therefore, do not include the Fund’s “Acquired Fund Fees and Expenses,” if any. The contractual fee waiver does not provide for the recoupment by the Adviser of any fees the Adviser previously waived. The Adviser may continue the waiver after the three year period, but there is no guarantee that the Adviser will do so and after October 31, 2015, it may be cancelled or modified at any time.
***This AUM includes the assets of the SPDR Gold Trust (approx. $69 billion as of March 31, 2012), for which State Street Global Markets, LLC, an affiliate of State Street Global Advisors serves as the marketing agent.
IMPORTANT RISK INFORMATION
ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs net asset value. Brokerage commissions and ETF expenses will reduce returns.
Bond funds contain interest rate risk (as interest rates rise bond prices usually fall); the risk of issuer default; issuer credit risk; liquidity risk; and inflation risk.
Foreign investments involve greater risks than US investments, including political and economic risks and the risk of currency fluctuations, all of which may be magnified in emerging markets.
Investing in high yield fixed income securities, otherwise known as junk bonds is considered speculative and involves greater risk of loss of principal and interest than investing in investment grade fixed income securities. These Lower-quality debt securities involve greater risk of default or price changes due to potential changes in the credit quality of the issuer.
Distributor: State Street Global Markets, LLC, member FINRA, SIPC, a wholly owned subsidiary of State Street Corporation. References to State Street may include State Street Corporation and its affiliates. Certain State Street affiliates provide services and receive fees from the SPDR ETFs. ALPS Distributors, Inc., a registered broker-dealer, is distributor for SPDR shares, MidCap SPDRs and Dow Jones Industrial Average, all unit investment trusts and Select Sector SPDRs.