Ying Wang
FINA3303 Investment
Prof. Vincent Muscolino
1/23/2015
Assignment 1: Mutual Funds
SPDR (in short term of the Standard & Poor’s Depositary Receipts) Trust fund, as a kind of exchange-traded funds (ETFs), is managed by State Street Global Advisors (SSgA).
SPDRs seek to provide investment results that, before expenses, correspond generally to the price and yield performance of the S&P 500 index (SPDR® S&P 500® ETF ). Their strategy is, by holding a portfolio of the common stocks that are included in the Index (the “Portfolio”), with the weight of each stock in the Portfolio substantially corresponding to the weight of such stock in the Index (Annual Report ), to achieve investment objective.
SPDRs are quite conservative investment, unlike mutual funds, their shares are created for investors at the time of their investment. They have a fixed number of shares that are bought and sold on the open market (What Are SPDR ETFs ). SPDR ETFs are traded on secondary market much like stocks and have ticker symbol “SPY”. The purchased or redemption price is determined by the net asset value (NAV) at the time of the transaction (What Are SPDR ETFs). The sell decision is determined by the stock’s expected return. Stocks that have a lower expected return relative to risk will generally be underweight positions (or avoided) in the portfolio (Frequently Asked Questions).
The top 10 holdings of SPDR are Apple Inc., Exxon Mobil Corporation, Microsoft Corporation, Johnson & Johnson, Berkshire Hathaway Inc. Class B, Wells Fargo & Company, Procter & Gamble Company, General Electric Company, JPMorgan Chase & Co., and Pfizer Inc.. Mainly 5 sectors are Information Technology (19.55%), Financials (16.00%), Health Care (14.81%), Consumer Discretionary (11.86%), and Industrials (10.35%). SPDR ETFs allow investors to make smaller bets on where the market is heading, since they trade at a fractional level of the overall index. Either short run or long term position, SPDRs have ways to hedge the market.
SPDRs have net assets 192,856.84 million dollars in total (as of 1/21/2015) within 505 holdings. Turnover ratio is 2.99%, which means there is a low possibility being replaced with other holdings in a year. Portfolio beta keeps 1.00 so far. For 3 years risk statistics, Sharpe ratio is 2.08 with 9.08 standard deviation. And for 5 years, Sharpe ratio goes down to 1.16 with higher standard deviation 12.96. According to annual report, trustee charge fees based on the investment amount (see Appendix) but average 0.09% on Prospectus, which is much lower than the category average 0.38%.
Besides, SPDRs gain 13.54% for 1-year return, 20.22% for 3-years return, and 15.27% for 5-years return. Based
