SPDR municipal bond fund tracking error

From Bogleheads
Jump to navigation Jump to search

SPDR municipal bond fund tracking error measures State Street SPDR's indexing performance. Tracking error is the ultimate measure of judging an index fund manager's performance.

Municipal bond market indexing

Since bond indexes can include huge numbers of illiquid bonds, replicating an index is often very costly. SPDR®,[note 1] in an attempt to control costs, samples securities in their bond index funds. The sampling attempts to match the sector and risk metrics of the underlying bonds in the index. Because a sampled index fund does not hold all of the securities in the underlying index, its returns may vary somewhat from those of the index. Such performance variance is termed "sampling error." SPDR funds include two broad nationally based exchange traded (ETF) municipal bond funds structured across two bond maturity levels: short and long term bonds. [note 2] The following table shows the number of securities held by the funds and by municipal bond benchmark indices. The comparative indices include the Bloomberg Barclays Capital Managed Money Municipal Short Term Index and the Bloomberg Barclays Capital Managed Money Municipal Bond Index.

Table 1. Municipal Bond Market
Fund Date Fund securities Comparative index securities [1]
SPDR Nuveen Bloomberg Barclays Capital Short Term Municipal Bond ETF 1/31/2017 1,160 4,177
SPDR Nuveen Bloomberg Barclays Capital Municipal Bond ETF 1/31/2017 2,707 22,514

Tracking error

See also: Vanguard municipal funds vs. municipal bond etfs

The following table provides the tracking errors for the SPDR ETFs. Tracking errors reflect the net asset value returns. The values do not include any purchase or sale transaction costs borne by the investor. In the short performance history of the funds, net asset value return tracking error has been slightly higher than the 0.20% average expense ratio. Detailed annual tracking error data, along with additional statistical measurement of fund returns, are provided in the footnote tables.

Table 2. SPDRs Municipal Bond Fund Tracking Errors (compound annual returns) [2]
Fund NAV return
Year Tracking Error
SPDR Barclays Capital Short Term Municipal Bond ETF [note 3]
2008-2016 -0.24%
SPDR Barclays Capital Municipal Bond ETF [note 4]
2008-2016 -0.27%

Notes

  1. "SPDR®" is a registered trademark of Standard & Poor's Financial Services LLC ("S&P") and has been licensed for use by State Street Corporation.
  2. Additional SPDR municipal funds:
    • SPDR Nuveen Bloomberg Barclays Capital California Municipal Bond ETF
    • SPDR Nuveen S&P VRDO Municipal Bond ETF
    • SPDR Nuveen Bloomberg Barclays Capital New York Municipal Bond ETF
  3. Table 3.
    SPDR Nuveen Bloomberg Barclays Capital Short Term Municipal Bond ETF

    (View Google Spreadsheet in browser, then File --> Download as to download the file.)

    Note: If the spreadsheet is blank, select a different sheet, then back to that sheet. The image will be refreshed.

  4. Table 4.
    SPDR Nuveen Bloomberg Barclays Capital Municipal Bond ETF

    (View Google Spreadsheet in browser, then File --> Download as to download the file.)

    Note: If the spreadsheet is blank, select a different sheet, then back to that sheet. The image will be refreshed.

References

External links