State Street Global Advisors, the third-largest U.S. issuer of exchange traded funds, is planning to add to its lineup of sector ETFs.
As was previously announced by index providers MSCI Inc. and Standard & Poor's, the telecommunications sector will undergo major changes later this year, becoming the new communications services sector. SSgA is planning to add a new sector SPDR ETF to reflect the communications services sector.
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That sector will include telecom stocks as well as some companies currently residing in the consumer discretionary and technology sectors.
Inside The New ETF
SSgA's new ETF will be known as the Communication Services Select Sector SPDR Fund and trade on the New York Stock Exchange under the ticker XLC. The new ETF will track the Communication Services Select Sector Index. That index is cap-weighted.
The index includes securities of companies from the following industries: diversified telecommunication services; wireless telecommunication services; media; entertainment; and interactive media & services, according to an SSgA filing with the Securities and Exchange Commission.
The filing did not highlight what companies will be part of that index because S&P and MSCI have not revealed which companies will be leaving the consumer discretionary and technology sectors for communication services. Those changes are expected to be revealed Sept. 28.
In 2015, SSgA created the Real Estate Select Sector SPDR (NYSE:XLRE) to accommodate the separation of real estate stocks from the financial services sectors. Investors in the Financial Select Sector SPDR (NYSE:XLF) received a dividend in the form of XLRE shares to reflect real estate becoming the 11th S&P 500 sector. It remains to be seen whether SSgA will follow a similar strategy with the new XLC and its consumer discretionary and technology funds.
The XLC filing did not include an expense ratio, but the existing sector SPDR ETFs such as XLF and XLRE charge 0.13 percent per year, or $13 on a $10,000 investment.
Disclosure: The author owns shares of XLF.
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