State Street has become the latest ETF issuer to jump in on the corporate bond ETF boom, launching the SPDR Barclays Capital Short Term Corporate Bond ETF (SCPB) on Wednesday. SCPB will be linked to the Barclays Capital U.S. 1-3 Year Corporate Bond Index, a benchmark that measures the performance of investment grade corporate debt with a time to maturity between one and three years. SCPB will charge an expense ratio of 0.12%, and began trading with about $6 million in assets.
SCPB will compete most closely with the Vanguard Short-Term Corporate Bond ETF (VCSH), which was launched less than a month ago and charges 0.15% in expenses. VCSH is linked to the Barclays U.S. 1-5 Year Corporate Bond Index, making its duration slightly longer than that of SCPB. In addition to its short-term corporate bond ETF, Vanguard also launched intermediate term (VCIT) and long term (VCLT) corporate bond funds, significantly expanding the number of “pure play” corporate bond ETFs available to U.S. investors.
Despite the tremendous success of the iShares GS $ InvesTop Corporate Bond Fund (LQD), which has a market capitalization of more than $13 billion, ETF issuers have been slow to develop the corporate bond corner of the market. Until now at least. While total bond market ETFs such as BND and AGG include allocations to investment grade corporate bonds, these “one stop shop” bond ETFs are tilted heavily towards Treasuries and U.S. agency securities.
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Disclosure: Long LQD.