State Street launches four full-weight sector SPDR ETFs at 0.12% annual fee

State Street Investment Management launched four sector ETFs on Wednesday that give each sector's largest companies their full index weight, and priced all four at a 0.12% annual fee. The State Street S&P 500 Market Sector SPDR ETFs cover technology, consumer discretionary, consumer staples and energy, according to the firm.

Unlike State Street's existing Select Sector SPDRs, the new Market Sector funds track S&P 500 sector indexes that do not cap any single company's weight, according to the press release. The Select Sector funds follow indexes that trim those largest names, which the prospectuses tie to IRS diversification rules.

Each Market Sector fund holds its Select Sector counterpart as a base, then buys shares of the biggest companies directly to make up the difference.

XLKM, the technology fund, held 66.59% of assets in the State Street Technology Select Sector SPDR ETF (XLK) on October 13, according to State Street's website. Nvidia was 15.41% of XLK and 20.93% of XLKM's index. The XLK stake works out to roughly 10.3% in Nvidia; the fund buys another 10.66% of the chipmaker directly, for about 20.9%, matching the index.

Apple and Microsoft are handled the same way, according to State Street: 18.85% and 15.27% of XLKM's index, against 13.88% and 11.25% in XLK.

The State Street S&P 500 Consumer Discretionary Market Sector SPDR ETF (XLYM) targets 43.23% in Amazon.com Inc., against Amazon's 23.54% weight in its Select Sector counterpart XLY. That is the widest gap among the four funds. XLYM held 63.82% of assets in XLY, added 17.81% through Amazon shares bought directly, and also holds Amazon options contracts.

Anna Paglia, chief business officer at State Street Investment Management, said: "Today, sectors are increasingly used as building blocks in asset allocation and model portfolios." The new funds, she said, give investors "another way to put their views into practice, with exposure designed to more closely reflect the market cap weighting of the S&P 500 sector indexes."

A 13.61-point spread between the staples and discretionary sectors this year was carried by a handful of names in State Street fund data, this publication reported in September.