This post was originally published on this site
Are investors falling out of love with the market’s first and most widely used exchange-traded fund?
The SPDR S&P 500 ETF Trust SPY, +0.17% has seen massive outflows this year, while other S&P 500-tracking funds from other providers have seen a flurry of new investors, in some cases growing by about 10% in size.
Outflows have totaled $7.69 billion for the SPDR fund thus far this year, according to FactSet data, by far the most of any ETF. (In second place is the iShares Russell 2000 ETF IWM, +0.08% with $2.57 billion in outflows.) Among its peers, the Vanguard S&P 500 ETF VOO, +0.17% has had inflows of $8.69 billion, while the iShares Core S&P 500 ETF IVV, +0.15% had more than doubled that, with inflows of $17.78 billion, the most of any ETF this year.
A representative for SPDR didn’t immediately return a request for a comment.
The SPY, as it is commonly known in reference to its ticker symbol, remains the largest and most heavily traded fund on the market by far. It has $236.4 billion in assets, more than twice the $116.5 billion size of the iShares fund, and three times the $70.3 billion in Vanguard’s fund (Vanguard also offers an S&P 500 mutual fund that has $324.6 billion in assets.).
The SPDR fund is also the largest of the three based on trading volume. While the iShares fund has a 30-day average volume of 3.58 million shares and Vanguard’s clocks in at about 2 million, average daily volume is 67.6 million for the SPDR fund. That makes it one of the most actively traded securities of any type on a regular basis.
Because the SPY is a favorite holding for short-term traders, as well as frequent tool for hedging against or shorting the market, the fund’s assets can fluctuate wildly on a day-to-day basis. In March, for example, it saw inflows of more than $8 billion on a single day.
“This is what I use when I trade, and if I’m only going to hold for a day or a week, I don’t care about the expense ratio or other things like that, which may distinguish it from its rivals. Because a lot of people trade the SPY like that, it sees a lot more volatility in its flows,” said David Santschi, chief executive officer at TrimTabs Investment Research, an institutional research firm.
However, he added, “we’re seeing an overwhelming preference for passive products in the U.S., so when people do get into that space, they may look for family loyalty—using a Vanguard product if they already own other Vanguard funds—and wanting the cheapest thing.”
He noted that SPY’s expense ratio was 0.09%, which is among the cheapest for ETFs, but still more than twice the 0.04% ratio charged by Vanguard and iShares. “We’re talking about small amounts, but in percentage terms it’s huge,” Santschi said.
All three funds are passive instruments, which means they simply track the performance of the underlying S&P 500 index SPX, +0.19% by holding the same things it holds, and in the same proportion. As a result, the trio of funds have essentially the same performance, although there are some slight differences over the long term due to tracking error. Over the past 12 months, the SPDR fund is up 13.7%, compared with the 13.9% rise of both the Vanguard and iShares funds.
According to FactSet, the median tracking difference over the past 12 months for the SPDR fund is -0.13%, compared with -0.06 for the iShares fund and -0.04% for the Vanguard one.
The inflows into iShares underlines how dominant the suite of funds—which is owned by BlackRock Inc.—has become. According to research firm ETFGI, it is by far the largest ETF provider, with a market share of 37% and 808 products trading.
While Vanguard is the second-biggest ETF sponsor (18.6% market share), it is the biggest player in passive investing, and according to Morningstar data it took in $177.3 billion in inflows across its products between the start of the year and May. That’s about as much as its 10 closest competitors combined. IShares was in second place.
Due to the outflows from the SPY, SPDR State Street Global Advisors, the third major player in the passive arena, had outflows of $504 million.
For U.S.-listed equity ETFs overall, inflows have totaled $178.46 billion year-to-date.