Select Sector SPDRs, a family of exchange traded funds (ETFs) that divide the S&P 500 into nine individual sector funds, saw its collective assets under management climb by 51.95% or $8.87 billion in 2007. This brings Select Sector SPDRs’ total assets to $25.9 billion, expanding its position as the leading sector ETF family. Launched in 1998, Select Sector SPDRs is the oldest brand name in sector exchange-traded funds.
Leading the Sector SPDRs asset gainers for 2007 was Financials (XLF), which soared a dramatic 122.94% to end the year with $5.02 billion. The Energy SPDR ETF (XLE) rose 86.41% to finish at $7 billion. The Materials (XLB), Healthcare (XLV), Consumer Staples (XLP), Industrials (XLI) and Technology SPDRs (XLK) all posted double-digit gains, followed by the Consumer Discretionary SPDR (XLY), which ended the year up 8.56%.
Only the Utility SPDR (XLU) ended 2007 in a negative position, with an asset decline of 16.80% for the year.
“Two thousand and seven was another extremely strong year of asset growth for us, driven both by professional investors using Sector SPDRs for long or short purposes, and individual investors looking to augment their portfolios with the specific sectors they feel bullish about,” said Dan Dolan, Director – Wealth Management Strategies, Select Sector SPDR Trust.
“While most ETF providers continue to position their products as substitutes for traditional mutual funds, an attribute from which we also benefit, we’re seeing increased usage of Select Sector SPDRs as substitutes for equities, to reduce single stock exposure.”
Shorts Turn to Financials
Select Sector SPDRs are used by many professional investors to hedge portfolio positions.
Short sellers(1) had an especially active 2007, ratcheting up their positions across all but two of the nine sectors by an aggregate 78% or a 111 million share increase in short positions since the end of December 2006.
Leading the short interest position gainers among the sectors was Financials which rose by a blistering 417%, or more than 115 million shares shorted in 2007, followed by Consumer Discretionary (XLY), which saw its short positions increase by 186% or 14 million shares. Technology (XLK) took a distant third place, rising 32% for a total of nine million shares shorted.
(1) Short Selling is the practice of selling financial securities the seller does not then own, in the hope of repurchasing them later at a lower price. This is done in an attempt to profit from an expected decline in price of a security. Short positions represent the total amount of shares of a given security that has been sold short and not covered, as of a particular date.