The ETF industry hit a milestone this week marking 30 years since the SPDR S&P 500 ETF Trust (SPY) listed in the US.
At the time of launch, SPY had a mere $6.5m assets under management (AUM) but three decades later now leads the industry with a whopping $375bn AUM.
Although not the first ever ETF launched, this happened in Canada three years earlier, the birth of SPY marked a seminal moment for the ETF industry as we know it today – an industry that globally is approaching $10trn in assets.
The creator, Nathan Most, developed the ETF in a bid to boost trading volumes. He was initially turned down by Jack Bogle, a staunch critic of ETFs, before turning to State Street Global Advisors (SSGA).
Initial adoption was slow and SSGA considered taking it off the market in its early years, however, the ETF grew to the point that even Bogle admitted its significance.
Last year, SPY recorded average daily trading volumes of $39bn of SPY, making it the world’s most actively-traded equity security, with three-times the daily volume of Apple stock.
Meanwhile, its fee of 0.945% brings State Street annual revenues of $350m.
While SPY’s dominance as the industry-leading ETF remains, cheaper rivals have been closing in in recent years. SPY has been undercut by both the iShares Core S&P 500 ETF (IVV) and the Vanguard S&P 500 ETF (VOO) which have TERs of 0.03%, respectively.
As a result, the pair have been hoovering up assets.
VOO raked in $44.1bn in the 12 months to 23 January, versus $27.1bn for IVV. While SPY saw inflows of just $2.8bn, according to ETFLogic.
IVV is now SPY’s closest rival with $302bn AUM, while VOO is slightly further back with $272bn, albeit with the momentum in its favour.
It remains to be seen whether SPY will lower its fees as its rivals make ground. Either way, its position as a granddaddy of ETFs will go unchallenged.
The ETF has taken on many guises since its inception, with the likes of active and thematic ETFs dominating new launches. It is worth remembering where they came from.
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