On Wednesday, September 2, State Street Investment Management announced the debut of the State Street SPDR UC Investments 90/10 Endowment Strategy Index ETF (UCBG). Notably, this fund was created through a collaboration between State Street and UC Investments, the investment arm of the University of California.
Key Takeaways:
- State Street launched the State Street SPDR UC Investments 90/10 Endowment Strategy Index ETF (UCBG), a new fund made in collaboration with UC Investments.
- The fund debuted with a $2.5 billion initial investment from UC Investments. As a result, this makes it the largest-ever U.S.-listed ETF launch.
- UCBG blends exposure to the S&P 500 with a smaller allocation to short-duration investment-grade corporate bonds.
Backed by a $2.5 billion initial investment from UC Investments, UCBG debuts as the largest U.S.-listed ETF launch in history, according to State Street.
The fund’s innovative investment approach seeks to replicate the total returns of the UC Investments 90/10 Endowment Strategy Index.
Pairing Equity and Fixed Income Exposure
Specifically, the index offers a 90%/10% equity and fixed income allocation, with 90% focused on large caps within the S&P 500 and the remaining 10% focused on investment-grade short-duration corporate bonds.
In fact, UC Investments’ top-performing Blue and Gold Endowment Pool inspired the index. Through the ETF wrapper, this institutional strategy is now available to all investors beyond the University of California community.
See More: Target vs. Lowe’s: A Tale of 2 Retail Q2s
“Our relationship with UC Investments spans more than two decades and has always been driven by innovation,” noted Ronald O’Hanley, chairman and chief executive officer of State Street Corporation. “With this launch, we are bringing an endowment-inspired strategy to a far broader range of investors, delivered with the low cost and transparency that make ETFs so powerful.”
A Variety of Portfolio Applications
UCBG’s investment approach may resonate with a number of different portfolios. Given its low expense ratio of six basis points, the fund can slot in as a simple and straightforward way to chase strong returns from the S&P 500 while mitigating risk with short-duration bonds.
Especially given the macroeconomic environment that we find ourselves in today, this strategy could certainly pay off. Lower-risk approaches are currently seeing broad appeal, and balancing S&P exposure with an attractive bond class may thus offer a potent path through the macroeconomic chaos.
See More: Investors Are Balancing S&P 500 Growth With Gold Hedges
“State Street continues to bring innovative ETFs to market in support of institutional and retail investors, added Todd Rosenbluth, head of research at VettaFi. “While the initial investment stems from a large university, the simple approach is likely to appeal to a broader audience.”
State Street offers an impressive ETF library, with well over 170 funds listed in the United States. One of its largest funds, the State Street Technology Select Sector SPDR ETF (XLK), holds over $120 billion in assets under management.
For more news, information, and analysis, visit the Equity ETF Content Hub.
Originally posted on ETF Trends
A message from Advisor Perspectives and VettaFi: Discover something new! Click here to register for our upcoming webcasts
Read more commentaries by VettaFi
