Industry Updates

State Street to fully replicate global and Asia dividend aristocrats ETFs

The change will allow it to ‘track the indices accurately’

Theo Andrew

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State Street Global Advisors (SSGA) is set to fully replicate the underlying index of three of its dividend aristocrat ETFs.

SSGA is updating the investment strategies for the SPDR S&P Global Dividend Aristocrats UCITS ETF (GLDV), the SPDR S&P Global Dividend Aristocrats ESG UCITS ETF (GEDV) and the SPDR S&P Pan Asia Dividend Aristocrats UCITS ETF (ASDV) to “track the indices accurately”.

It made the change to utilise the increased diversification limits under UCITS rules, allowing it to hold up to 20% in an individual company.

In a notice to shareholders, SSGA said: “In order for the funds to track the indices accurately, they will make use of the increased diversification limits available under Regulation 71.1 of UCITS. These limits permit the fund to hold positions in individual constituents of the Index issued by the same body of up to 20%.

“The index tracking strategy of the relevant fund will be changed from an optimisation strategy to a replication strategy.”

Under an optimised strategy, ETFs adhere to the 5/10/40 rule for UCITS, meaning the maximum weight to a single security can be above 10% only if the top four holdings do not exceed 40%.

When the ETF tracks an index with a single weighting above 10%, they are required to track away from the index to remain UCITS compliant.

However, by becoming fully replicating, the ETFs will move to the 20/35 rule, meaning they can take higher concentrations of up to 20% in a single security.

GLDV is the largest of the three ETFs with $970m assets under management (AUM), followed by ASDV with $150m and GEDV with $14.5m.

BlackRock made similar changes to several of its ETFs earlier this year.

It comes after SSGA announced it would be expanding its securities lending programme across two more of its ETF ranges to “provide an additional source of income for fund shareholder”.

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