State Street to merge $1.8bn ETF into larger fund

State Street Global Advisors plans to merge away a $1.8bn small-cap equity ETF into a larger vehicle, and shutter three tiny ETFs, filings show.

The SPDR 600 Small Cap ETF (SLY) will be absorbed by the $5.2bn SPDR Portfolio S&P 600 Small Cap ETF (SPSM), effective June 9.

Both funds hold many of the same investment strategies and track the S&P Small Cap 600 Index, regulatory disclosures show.

“The merger of SLY and SPSM aligns the product suite by having one ETF track the S&P SmallCap 600 Index,” the company said.

The ETFs are part of a low-cost series of so-called building block ETFs, fund prospectuses show.

Both ETFs charge 5 basis points in fees, including waivers. The two funds are also run by the same portfolio managers.

Investors pulled $73mn from SPDR 600 Small Cap over the year ended January 31 and $995mn from SPDR Portfolio S&P 600 Small Cap ETF, Morningstar Direct data shows.

The firm will pull the plug on the $21mn Bloomberg SASB Corporate Bond ESG Select ETF, the $10mn SPDR Bloomberg SASB Developed Markets Ex US ESG Select ETF and $9mn SPDR Bloomberg SASB Emerging Markets ESG Select ETF, filings show.

The corporate bond ETF was launched in 2020 and the emerging markets and developed markets ETFs debuted in January 2022, the funds’ websites show.

The funds will stop accepting orders by April 12, and will liquidate by or before April 18, filings show.

The corporate bond fund uses the Bloomberg SASB US Corporate ESG Ex-Controversies Select Index, filings show. The emerging-market fund’s returns tracked the Emerging Markets Large & Mid Cap ESG Ex-Controversies Select Index. And the developed markets ETF follows the Bloomberg SASB Developed Markets ex US Large & Mid-Cap ESG Ex-Controversies Select index.

The funds are three of State Street’s five smallest ETFs, according to Morningstar. Overall, the firm had 141 ETFs with a combined $1tn in assets as of January 31. Together, the ETFs added $42.5bn over the 12-month period.

Investors pulled $2mn out of the corporate bond fund over the year ended January 31, and $14mn each from the emerging markets ETF and the developed markets ETF, according to Morningstar Direct.

The corporate bond ETF peaked in size in July 2021, with $30mn, according to the Chicago-based fund tracker. The emerging markets and developed markets ETFs, meanwhile, steadily shrank after launching.

The company said that it decided to close the ETFs, “based on investor feedback and market demand during an ongoing review of the SPDR ETF offering that’s designed to ensure our line-up is well-positioned for long-term growth”.

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