State Street Global Advisors (SSGA), has launched 10 exchange-traded funds on Euronext’s newly established London platform. It brings the total ETF count on the new exchange to 12 following its launch earlier this week [3rd May]. The 10 MSCI World Sector SPDR ETFs, that are also cross-listed on the London Stock Exchange, will track indices provided by MSCI offering exposure to globally-listed companies operating within chosen sectors.
Alexis Marinof, Head of SPDR ETFs EMEA.
Sector ETFs provide a means for investors to adjust their exposures simply and cost-efficiently in response to changes in the economic cycle.
In the early phase of the cycle, the broad stock market tends to do well as expectations for future economic activity turn increasingly upbeat. On a relative basis, cyclicals and interest-rate-sensitive sectors such as consumer discretionary and financials tend to outperform. Furthermore, economically sensitive sectors such as technology and industrials receive boosts from increased activity.
During the mid-cycle phase, economically sensitive sectors may continue to outperform with industries that receive greater product demand once the recovery has been established doing particularly well. Most stock market corrections have historically occurred during this phase however, leading to less reliability of historic analysis as a determinant of sector outperformers. Investors may wish to avoid sectors such as utilities though as defensive sectors have traditionally been laggards.
As the economic recovery reaches its later stages, inflationary pressures push up the costs of raw materials which tend to directly lead to the relatively strong performance of companies in the energy and materials sectors. Defensive sectors may also provide market-beating returns.
During the actual recession, defensive sectors continue to outperform with consumer staples historically providing the most reliable record of outperformance. In the same vein, utilities and health care may also provide good returns.
Alexis Marinof, Head of SPDR ETFs for Europe, Middle East and Africa (EMEA) commented in a statement: “In the current economic environment, investors would do well to consider a sector rotation strategy. It can add an important layer of diversification and control to multi-asset portfolios.
“By tilting away from the sectors expected to underperform in the short term during periods of economic stress, and towards more resilient sectors, investors can use sector rotation to reduce the impact of volatility on their portfolios. Today, for tactical picks, investors could be looking at better earnings coming from technology companies.”
The recently launched ETFs include the:
SPDR MSCI World Consumer Discretionary UCITS ETF (WCOD)
SPDR MSCI World Consumer Staples UCITS ETF (WCOS)
SPDR MSCI World Energy UCITS ETF (WNRG)
SPDR MSCI World Financials UCITS ETF (WFIN)
SPDR MSCI World Health Care UCITS ETF (WHEA)
SPDR MSCI World Industrials UCITS ETF (WIND)
SPDR MSCI World Materials UCITS ETF (WMAT)
SPDR MSCI World Technology UCITS ETF (WTCH)
SPDR MSCI World Telecommunications UCITS ETF (WTEL)
SPDR MSCI World Utilities UCITS ETF (WUTI)
Each fund has a total expense ratio of 0.30%.