State Street Global Advisors has lost its more than three-decade crown as king of the biggest exchange-traded fund (ETF) in the world after being usurped by a rival Vanguard US S&P 500 product this month.
According to newly released ETF market data, the Vanguard S&P 500 ETF (VOO) edged about US$1.5 billion ahead of the 1993-vintage State Street SPDR product (colloquially known as ‘Spider’, ticker code SPY) in mid-February.
The Vanguard US index-tracker reported close to US$632 billion at the latest count after pulling in some US$23 billion in net inflows year-to-date compared to about US$630 billion in total assets for the SPDR.
Figures from specialist research house, ETFGI, show the SPDR fund saw assets under management fall by about US$19.4 billion in January alone while the Vanguard S&P 500-follower piled on almost US$20.4 billion in the same month.
Vanguard has been rapidly gaining on State Street in the race of the 500s in a trend emblematic of the dramatic uptake of ETFs among advisers and retail investors.
State Street was an ETF pioneer, winning strong institutional support for its low-fee, US stock market replicant but has lost ground to main competitors Vanguard and the BlackRock-owned iShares that have ridden the retail wave more effectively.
Eric Balchunas, Bloomberg Intelligence senior ETF analyst, told US media: “There’s a symbolic moment here in that SPY was created to trade. It was literally invented by an exchange. It’s the liquidity king,” said. “VOO taking over shows how much the retail and adviser market have adopted ETFs.”
The Vanguard US market ETF has been popular among NZ investors, too, picking up direct on-platform fans as well as via a portfolio investment entity version developed under the InvestNow Foundation Series brand that has drawn in almost $180 million.
ETFGI data shows S&P 500-trackers represent the three largest US ETFs with the State Street and Vanguard products matched by an iShares variant.
At the end of January, the iShares Core S&P 500 ETF held almost US$594 billion, the researcher says, albeit as net assets fell US$1.5 billion during the month.
Morningstar rates the Vanguard US index-tracker as one of the “best in class” that “fully replicates the S&P 500”.
“Because of the ETF’s bias toward the largest and the most established companies, it misses out when small-cap stocks outperform large-cap stocks, as they did in the fourth quarter of 2020,” Morningstar says. “Likewise, when the S&P 500 becomes concentrated in a few large companies, the ETF can become top-heavy. This exposes the fund to US market risks should another dot-com-type bubble burst, during which the S&P 500 fell over 40% in the early 2000s.”
Headed by Salim Ramji, Vanguard also unveiled another round of fund fee-cuts last month as the index race-to-the-bottom on costs ticked up a notch.