State Street Introduces Eight
New Exchange Traded Index Funds
By Jeff
Troutner, TAM
Asset Management, Inc.
State Street Bank and Trust will soon be introducing
eight new exchange
traded funds (ETFs), four of which will be based
on new Dow Jones indexes covering the large growth,
large value, small growth, and small value asset classes.
The Dow indexes are based on State Street's Muldex
indexes. Returns for these indexes are listed at Index
Returns Through 03-31-00.
The Muldex indexes represent State Street's effort
to improve on the S&P/Barra indexes used by The
Vanguard Group and other fund companies. In developing
the Muldex value indexes, for example, State Street
started with the Barra indexes and used a multifactor
process that has the ability to distinguish many attributes
of a value stock, not just the Price-to-Book ratio.
The result is a family of style indexes which offer
unique value and growth choices for the large, mid
and small cap areas of the market. The chart below
shows how the Muldex indexes compare to others based
on the Fama/French
Three-Factor Analysis (we left out mid-cap indexes
for this illustration).
For example, the Muldex Large Value index has more
weighting to value stocks than the S&P/Barra Large
Value Index, but less value weighting than either
the Fama/French Large Value Index or the Wilshire
Large Value Index.
| Index |
Chart Label |
Index Fund
Example |
| S&P 500 Index |
S&P500 |
Vanguard 500 Index |
| Wilshire 5000 |
W5000 |
Vanguard Total Market |
| Russell 3000 |
R3000 |
None |
| Russell 1000 |
R1000 |
None |
| Russell 2000 |
R2000 |
Vanguard Small Cap |
| CRSP 9-10 |
CRSP 9-10 |
DFA US 9-10 Small Co. |
| CRSP 6-10 |
CRSP 6-10 |
DFA US 6-10 Small Co. |
| FF Large Growth |
FF LG |
None |
| FF Large Value |
FF LV |
DFA US Large Cap Value |
| FF Small Growth |
FF SG |
None |
| FF Small Value |
FF SV |
DFA US 6-10 Value |
| Barra Large Growth |
B LG |
Vanguard Growth |
| Barra Large Value |
B LV |
Vanguard Value |
| Barra Small Growth |
B SG |
Vanguard Small Growth |
| Barra Small Value |
B SV |
Vanguard Small Value |
| Russell 1000 Growth |
R1000 G |
None |
| Russell 1000 Value |
R1000 V |
None |
| Russell 2000 Growth |
R2000 G |
None |
| Russell 2000 Value |
R2000 V |
None |
| Wilshire Lg Growth |
W LG |
None1 |
| Wilshire Lg Value |
W LV |
None1 |
| Wilshire Sm Growth |
W SG |
None1 |
| Wilshire Sm Value |
W SV |
None1 |
| Muldex Large Growth |
M LG |
None2 |
| Muldex Large Value |
M LV |
None2 |
| Muldex Small Growth |
M SG |
None2 |
| Muldex Small Value |
M SV |
None2 |
The new State Street ETFs will be structured as open-end
funds in order to eliminate "cash drag"--
the performance hit associated with unit investment
trust versions of ETfs that only reinvest dividends
quarterly.
1 According to Wilshire,
their "Target" funds are not true index
funds. Comparing their performance to the Wilshire
indexes, we can see why.
2 The new State Street
exchange traded funds will be based on a Dow Jones-modified
version of the Muldex indexes. At this time, we do
not have data on these new indexes.
01/25/00
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