State Street Rolls Out Low-Cost Leveraged Loan ETF: A Rival To Its Own SRLN?

The ETF industry has been in a state of high caffeine intake for many years, launching hundreds of new funds each year across every conceivable strategy. The latest entrant hails from State Street Investment Management, which unveiled another new leveraged loans ETF, as it expands its enormous fixed-income roster.

The State Street SPDR S&P Leveraged Loan ETF (NYSE:LVLN) launched on Tuesday and is aimed at a section of the credit market that has been quickly expanding.

• SRLN is in positive territory. View the charts here.

LVLN offers diversified exposure to the investable leveraged loans universe, following the S&P USD Select Leveraged Loan Index. The fund features a 40-basis-point gross expense ratio, much lower than many of its established competitors. Leveraged loans-which carry a floating-rate structure and higher risks-typically are issued to borrowers with either poorer credit qualities or larger quantities of outstanding debt, making them an attractive yet complicated instrument in today’s changing rate landscape.

The underlying benchmark includes U.S.-dollar-denominated loans with a minimum facility size of $500 million. It also applies caps at an issuer, industry and loan facility level to avoid overconcentration. Further guardrails come from liquidity screens and market value weighting to keep the index investable and representative of real-world trading conditions.

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Todd Rosenbluth, head of research at VettaFi, pointed to the strategic value of the launch. He noted that the new ETF is a low-cost alternative to the firm's popular actively managed State Street Blackstone Senior Loan ETF (NYSE:SRLN).

SRLN remains one of the category's best-known options. It charges a significantly higher 70 bps for its actively managed portfolio of short-duration, non-investment-grade floating-rate senior debt across U.S. and international issuers.

As more ETFs jostle for space in the leveraged loan arena, LVLN enters a market that’s increasingly competitive — and increasingly relevant. With State Street’s brand behind it and a more wallet-friendly fee structure, the new fund could quickly become one to watch in the evolving leveraged loans ETF market.

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