Market Overview

State Streets Unveils Sector Rotation ETFs

State Streets Unveils Sector Rotation ETFs

State Street Corp. (NYSE: STT), the third-largest U.S. issuer of exchange traded funds added to its lineup of actively managed funds Wednesday with the launches of two sector rotation funds.

The SPDR SSGA Fixed Income Sector Rotation ETF (NYSE:FISR) and the SPDR SSGA US Sector Rotation ETF (NYSE:XLSR) are the firm's newest ETFs.

What Happened

FISR, the new fixed income fund, uses an ETF of ETFs strategy. That new ETF focuses on the following corners of the bond market: bonds issued by U.S. government or agency, treasury inflation protected securities (TIPS), corporate bonds, mortgage-backed securities, high yield bonds, international (including emerging markets) government and corporate bonds, senior loans and floating rate notes, according to State Street.

FISR has seven holdings. The SPDR Bloomberg Barclays Mortgage Backed Bond ETF (NYSE: MBG), SPDR Portfolio Long Term Corporate Bond ETF (NYSE: SPLB) and the SPDR Bloomberg Barclays Intermediate Term Treasury ETF (NYSE: ITE) combine for over 70 percent of the new fund's weight.

FISR has an annual fee of 0.50 percent, or $50 on a $10,000 investment.

Why It's Important

The SPDR SSGA US Sector Rotation ETF also uses an ETF of ETFs methodology and that new ETF's holdings are also other State Street funds.

XLSR's six holdings are comprised of sector SPDR funds. The Technology Select Sector SPDR (NYSE: XLK), Health Care Select Sector SPDR (NYSE: XLV) and the Consumer Discretionary Select Sector SPDR (NYSE: XLY) combine for over 81 percent of that new ETF's roster.

XLSR's other holdings are the real estate, industrial and communication services SPDRs. The new ETF charges 0.70 percent per year.

What's Next

XLSR “seeks to provide capital appreciation by overweighting or underweighting S&P 500 Sector ETFs based on ISG’s sector return forecasts and research, which includes a proprietary, quantitative sector selection model,” according to State Street.

XLSR is rebalanced monthly, though additional rebalances can occur. FISR, the new bond fund, also aims to rebalance monthly.

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