State Street Global Advisors (SSGA) has seen over €1bn inflows into its S&P 500 ETF since slashing fees to become the cheapest in Europe, outgunning rivals BlackRock, Vanguard and Invesco.
The SPDR S&P 500 UCITS ETF (SPY5) – which cut fees from 0.09% to 0.03% on 23 October – recorded €1.1bn inflows from the date of the announcement to 17 November, according to Morningstar data.
The Vanguard S&P 500 UCITS ETF (VUSA) – with a total expense ratio (TER) of 0.07% – was closest with €839m inflows over the same period.
Meanwhile, the iShares Core S&P 500 UCITS ETF (CSPX) and the Invesco S&P 500 UCITS ETF (SPXS) posted inflows of €512m and €484m, respectively.
The inflows highlight a stark turnaround for SPY5, which from the turn of the year to 23 October had only gathered €34.9m net inflows.
Chart 1: S&P 500 UCITS ETF inflows since 23 October
Name | Flow YTD to 23 October | Flow 23 October to 17 November | Total AUM | TER |
|---|---|---|---|---|
SDPR S&P 500 UCITS ETF (SPY5) | €35m | €1.1bn | €6.5bn | 0.03% |
Vanguard S&P 500 UCITS ETF (VUSA) | €3.2bn | €839m | €38.8bn | 0.07% |
iShares Core S&P 500 UCITS ETF (CSPX) | €2.7bn | €512m | €61.4bn | 0.07% |
Invesco S&P 500 UCITS ETF (SPXS) | €2.2bn | €484m | €18.7bn | 0.05% |
Source: Morningstar
The fee cut also coincided with a bumper month of returns for the S&P 500, which has risen by 7.4% over the same period.
As a result, SPY5 assets under management (AUM) has grown from €5bn to €6.5bn since the move, although it remains significantly behind its three rivals.
However, it does show the fee cut – driven by the need for SSGA to compete with its rivals – is working and could spark a fresh fee war with its three US rivals.
SSGA incorporated SPY5 into its securities lending programme – along with 66 other ETFs – in a bid to make the move more economically viable.
Matteo Andreetto, head of SPDR EMEA business at SSGA, commented: “The investor response has indeed been very positive across the UK and Europe.
"Our ability to provide an institutional quality investment solution at this competitive price point is highly compelling for investors, and we are proud to be continuing State Street’s tradition of innovation.”
The inflows chimed strongly with investors' sentiment following the fee cut, with many stating they would seriously consider the ETF within portfolios.
Dan Caps, investment manager at Evelyn Partners, said SPY5 “ticked a lot of boxes” but added investors would need to consider liquidity, spreads, tracking error and methodology.
“It will be interesting to see how the other big players in the markets react to the move and how willing and able they are to compete on price. Existing holders of their instruments are likely to want clarity on this sooner rather than later,” he said.
Wayne Nutland, fund manager, Premier Miton Investments, added: “For new money requiring physical exposure, 0.03% would seem like a fairly clear choice. Investors will need to consider switching costs but the S&P 500 is typically a very low-cost exposure to trade.
