State Street to Launch New Australian ETFs


The Australian Stock Exchange (ASX) and State Street Global Advisors (SSgA), the investment management arm of Boston-based State Street Corporation, today announced that they have signed an agreement to develop the first exchange-traded funds (ETFs) available to Australian investors.

The move signals State Street's intention to enter the international ETF fray. Earlier this year, the first foreign-based ETFs hit Europe, with Merrill Lynch co-managing the first two ETFs in Germany. Barclays Global Investors launched the first ETF available to UK investors. In addition, Barclays has also launched a parade of country-specific ETFs that track markets abroad and are available on the American Stock Exchange (AMEX).

The State Street announcement indicates that it does not want to be left out of the game as companies scramble to launch ETFs in Europe and Asia.

Under the terms of the State Street/ASX agreement, the first Australian ETF will become available by April 2001. Although the two parties have yet to decide upon a benchmark index, the agreement allows for the development of ETFs over the Standard & Poor's (S&P)/Australian Stock Exchange (ASX) 20, the S&P/ASX 50, the S&P/ASX 100, the S&P/ASX 200, the S&P/ASX 300, and the All Ordinaries Index.

Although he could not comment on the specifics of the agreement, Gus Fleites, Director of ETFs at State Street, said, "To the best of our knowledge, no other players have been licensed to launch such products based on the new suite of S&P/ASX indices. We expect that the eventual products will reflect the same advantages ETFs offer investors across the globe: diversified portfolio, listed and traded on an exchange, and competitive expense ratios."

State Street and ASX expect the initial demand for the new ETFs will be from institutional investors, but that retail investors will be attracted to them as a low-cost means of gaining exposure to equities.

This latest announcement highlights the fact that there is truly a global demand to invest in ETFs.

"Providing ETFs forms part of ASX's program to meet the growing demands of Australian investors by broadening the range of products and services we offer," said ASX Managing Director and CEO, Richard Humphry.

"The passive investment approach helps to keep costs down through relatively low turnover and the ability to trade continuously makes them a very flexible instrument," said Mark Lazberger, Managing Director of SSgA Australia.

Fleites said that State Street has "several projects underway outside the U.S. for new ETF launches," but was not at liberty to comment on specifics at the time.