Few champions can stay on top forever—even the ones who virtually invent the game. On Jan. 29 the SPDR S&P 500 ETF Trust turns 30. With $375 billion in assets, it’s the biggest exchange-traded fund on the planet, but competition for the No. 1 spot is getting fierce.
Known by everyday investors and pros alike by its ticker symbol, SPY, the fund simply tracks the S&P 500 index of the largest US public companies, for a modest fee of 0.095% of assets per year. It’s the go-to product especially for institutional money managers who want a fast and dependable way to hop in and out of the market. But other ETFs follow the same index at a third of its expense ratio and have become a magnet for everyday investors. In the past year, BlackRock Inc.’s $302 billion iShares Core S&P 500 ETF and the $275 billion Vanguard S&P 500 ETF have added tens of billions of new assets while SPY posted outflows.
Even if SPY is overtaken, its place in history as the fund that changed both personal investing and the asset management business is secure. It wasn’t technically the first ETF—that distinction belongs to a Canadian product—but it was the first in the biggest stock market when its shares began trading in 1993 under the original name Standard & Poor’s Depositary Receipts, or “spiders.” In an echo of its challengers today, the new fund upset plenty of established businesses.
First and foremost, it was a passive index fund. In the early 1990s, these were still fairly novel—they accounted for less than 2% of US fund assets, according to Investment Company Institute data, compared with close to half today. While Vanguard founder Jack Bogle was evangelizing the virtues of low-cost indexing, the biggest stars of the mutual fund business were the stockpickers at places such as Fidelity, T. Rowe Price and Templeton. Investment products commonly carried hefty upfront sales commissions to compensate the brokers who hawked them, and equity funds carried average annual expenses of more than 1.4%.
No comments:
Post a Comment