SPY: An ETF success story

Apr 11th, 2017 | By | Category: Equities

Dive deeper into ESG & Impact investing at our upcoming breakfast briefing on Wednesday 28th March 2018 at The South Place Hotel, London, with presentations from Equileap, FTSE Russell, MSCI and UBS - REGISTER NOW

Widely known by its ticker code, SPY, the SPDR S&P 500 ETF (NYSE Arca: SPY) was the first ETF to be listed in the US, appearing on the American Stock Exchange back in 1993. It is currently the most actively traded security in the world and accounts for 27% of total ETF industry volume, equal to the trading volume of the next 14 largest ETFs combined.

SPY: An ETF success story

For nearly a quarter century, SPY has provided investors with efficient, liquid and cost-effective access to the S&P 500 Index.

The fund was initially launched by State Street Global Advisors (SSGA) as Standard and Poor’s Depositary Receipts to provide investors with a convenient way of trading and owning the entire S&P 500 Index.

Current AUM is over $230bn making it the largest ETF in the world with more than twice the assets of its nearest S&P 500-tracking rival, the iShares Core S&P 500 ETF (NYSE Arca: IVV), which holds $102bn. SPY accounts for 59% of all ETF assets tracking the S&P 500 Index.

SPY is the only ETF that has been traded at penny-wide spreads for more than 12 consecutive years, displaying impressive liquidity resilience especially in times of market stress. On average, over 15 million of its shares trade every hour and it trades over 6.2x more than Apple, the largest company in the world by market-cap.

The Vanguard S&P 500 Index Fund (NYSE Arca: VOO) is the next largest S&P 500 ETF after SPY and IVV, with $64bn AUM. IVV has the lowest fees of the three at 0.04%, with VOO coming in just above at 0.05% and SPY having the highest fees at 0.09%. Where SPY excels though is tracking error, with both IVV and VOO posting 0.08 compared to just 0.03 for SPY.

Part of the continued appeal of SPY can be seen in the trend towards passive asset management since its launch. The S&P 500 has outperformed 85% of active managers over the last three, five and ten year periods, according to Morningstar data.

Tags: , , , , , , ,

Leave a Comment