The ETF industry continues to grow, with new funds arriving all the time. Each year, hundreds of ETFs arrive on the scene, from covered call ETFs to active bond ETFs and everything in between. State Street Investment Management has launched the latest ETF to join the ecosystem, adding a new leveraged loans ETF to play in the increasingly prominent leveraged loans space.
The major firm’s asset management arm launched the State Street SPDR S&P Leveraged Loan ETF (LVLN) this past week. According to a press release, the fund aims to offer broad exposure to the investable leveraged loans universe. In doing so, it will charge a gross expense ratio of 40 basis points (bps). Leveraged loans are high-risk loans provided to purchasers with poor credit or significant debt.
Specifically, the fund aims to track the performance of the S&P USD Select Leveraged Loan Index. It includes U.S. dollar-denominated loans with a minimum of $500 million size, capping individual securities based on issuer and industry constraints as well as loan facility level. The index also applies liquidity filters as well as various market value weights.
“State Street Investment Management has one of the broadest index-based fixed income lineups, but continues to innovate to support advisors,” said VettaFi’s Head of Research Todd Rosenbluth. “The new ETF offers a low cost alternative to the firm’s popular actively managed SRLN.”
The State Street Blackstone Senior Loan ETF (SRLN) charges a 70 bps fee for its approach to short duration, noninvestment-grade, floating-rate senior debt of U.S. and non-U.S. firms. The fund, launched in 2013, has returned 8.4% over the last three years with its active approach. That performance beat its ETF Database Category average in that time.
As the ETF ecosystem continues to morph and grow, funds like LVLN will arrive into an increasingly competitive landscape. In the meantime, however, coming from a shop as reputable as State Street, it may be worth watching in the intriguing leveraged loans ETF space.
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