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The SPDG’s strategy is designed to deliver returns akin to those of a general market fund, providing a balance between income generation and total market return. The fund’s performance this year has seen a gain of 5.6%, as per Matthew Bartolini, head of SPDR Americas Research at State Street.
This innovative approach is a response to the issues faced by traditional yield-weighted funds like State Street’s SPDR Portfolio S&P 500 High Dividend ETF (SPYD). SPYD holds 36% of its portfolio in utilities and real estate investment trusts, sectors that represent just 5% of the index-based SPDR S&P 500 ETF Trust (ASX:SPY). This disproportionate sector weighting has led to a loss of 5% for SPYD this year, while SPY returned 17%.
Bartolini emphasized the importance of understanding how an ETF’s underlying index is constructed, as it can significantly influence the fund’s holdings. He stated that maximizing dividend yields can inadvertently lead to overexposure in certain sectors and a strong tilt toward value stocks. He further noted that “dividend strategies are going to have a value bias, and value is underperforming growth this year.”
The launch of SPDG represents State Street’s attempt to strike a balance between seeking income and maintaining a return profile similar to the broader market.
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