UPDATE: Vanguard Gets S&P 500 License For New Index-Based ETF
June 24 2010 - 12:25PM
Dow Jones News
Fund giant Vanguard Group Inc. plans to introduce
exchange-traded funds based on the popular S&P 500 stock-market
index and others as part of a line of new ETFs.
Vanguard's fund will be the third in the U.S. to track the
S&P--State Street Corp.'s (STT) State Street Global Advisors
provides its SPDR S&P 500 ETF that tracks the price and yield
performance of the index, and Blackrock Inc.'s (BLK) iShares also
has an ETF that tracks the index.
The difference among those indexes can come down to expense
ratios--a Vanguard spokesman said its ETF's proposed expense ratio
is 0.06%. The ratio for State Street's fund is 0.0945%, while
iShares' expense ratio is 0.09%, according to company websites.
Another differentiator among the ETFs is how closely they track
the index. For example, if the S&P is up 20% on the year, an
index-tracking ETF could be up 19.99% or 20.01%, the Vanguard
spokesman said.
Standard & Poor's, a subsidiary of McGraw-Hill Cos. (MHP),
licensed the S&P 500 to Vanguard so it could create an ETF
based on the index, which many investors view as the best
representation of how the stock market is faring. Financial terms
of the deal weren't disclosed.
The deal also allows Vanguard to launch eight new equity funds
and ETFs that target the growth and value segments of the S&P
500, MidCap 400 and SmallCap 600.
The agreement comes after S&P last month said it had
licensed seven European ETF sponsors to create and list S&P 500
ETFs on exchanges in major cities. The company also recently
licensed the National Stock Exchange of India to create and list
Indian rupee-denominated futures contracts on the S&P 500.
"Our agreement with Vanguard, and just recently with the seven
European ETF sponsors and the NSE, underscores Standard &
Poor's commitment to providing global investors with greater access
to the products they need to meet their trading objectives," Alex
Matturri, executive managing director at S&P Indices, said
Thursday.
Vanguard said it was expanding its index-fund family by
introducing 19 new funds with ETF shares to "provide investors with
additional low-cost stock and bond choices." The new ETFs will have
expense rations that are "substantially below" those of competing
products, Vanguard said.
-By Nathan Becker, Dow Jones Newswires; 212-416-2855;
nathan.becker@dowjones.com
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