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State Street announces benchmark changes for SPDR MSCI US and Europe Value


State Street Global Advisors, the asset management business of State Street Corporation has announced benchmark changes for the SPDR MSCI USA Value UCITS ETF [USVL LN] and the SPDR MSCI Europe Value UCITS ETF [EVAL LN]. 

Effective 11 July, these two ETFs changed their benchmarks to the MSCI USA Value Exposure Select Index and the MSCI Europe Value Exposure Select Index respectively.
 
The firm writes that the change will lead to a reduction in the number of securities in each ETF from over a thousand in aggregate, to 125 holdings per index.  The result will be a higher conviction value exposure. The indices are designed to be sector neutral with an issuer cap of 5 per cent, targeting value companies without taking on excessive sector or single security biases.
 
“The performance of the MSCI Value Exposure Select Index challenges the perception that value investing no longer works,” says Mandy Chiu, Head of EMEA and APAC SPDR Product for SPDR ETFs.  “There has been this widely-held view in the market that many value strategies have underperformed, but research demonstrates that the very high value exposure offered by the MSCI Value Exposure Select Index delivered returns in excess of the MSCI USA Index over the past 10 years.”
 
“We believe good factor strategies should provide high exposure to the targeted factors while keeping untargeted exposures in check.  The value funds now reflect the latest thinking in value investing, integrating strong value exposure with a quality filter which looks to avoid the value trap. Altering the benchmark for these funds responds to client demand for greater intensity in their value orientation.”
 
State Street writes that for over 30 years, index providers have segmented the global equity universe into either value or growth based on a set of indicators.  Value ETFs today make up the second largest category in the European smart beta/ factor ETF market, growing from less than 5 per cent of the market in 2006 to around 18 per cent of the market in 2018.

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