The Famous SPY ETF Is Getting A Low-Cost Stablemate

Home to nearly $300 billion in assets under management as of Dec. 19, the SPDR S&P 500 ETF SPY remains the world's largest and most heavily traded exchange traded fund.

SPY, which debuted in January 1993, is also the oldest U.S.-listed ETF and with an expense ratio of just 0.0945% per year, or $9.45 on a $10,000 investment, the fund fits the bill as inexpensive. However, SPY has faced increased competition in recent years from rival S&P 500 ETFs, namely the iShares Core S&P 500 ETF IVV and the Vanguard S&P 500 ETF VOO.

VOO and IVV were two of the fastest-growing ETFs of the soon to be completed and lower fees explain why. VOO, the Vanguard offering, charges just 0.03% per year year while IVV has an annual fee of 0.04%.

Why It's Important

State Street is finally fighting back, but it's not introducing a new ETF. Rather, the third-largest U.S. ETF sponsor is converting the $3.31 billion SPDR Portfolio Large Cap ETF SPLG to an S&P 500 ETF.

According to a statement of addition information (SAI) issued earlier this week, SPLG, which currently tracks the SSGA Large Cap Index, will begin tracking the S&P 500 on Jan. 24. SPLG's current expense ratio of 0.03% will be maintained, putting it into a tie with VOO for the honor of least expensive S&P 500 ETF.

State Street has previously used a similar strategy with some success. For example, rather than lower the fee of the SPDR Gold Shares GLD, a favorite of active traders and professional investors, the firm introduced a lower cost counterpart. The SPDR Gold MiniShares Trust GLDM debuted in June 2018 and now has nearly $1.1 billion in assets under management.

GLDM charges 0.18% per year, or 22 basis points less than GLD.

What's Next

There's more.

State Street's SAI reveals the SPDR Portfolio Total Stock Market ETF SPTM will move to the S&P Composite 1500 Index next month. With SPTM's current expense ratio of 0.03%, it will be tied with the iShares Core S&P Total U.S. Stock Market ETF ITOT for least expensive ETF tracking that benchmark.

The SPDR Portfolio Small Cap ETF SPSM is moving to the popular S&P SmallCap 600 Index. With SPSM's annual fee of 0.05%, the fund undercuts the iShares Core S&P Small-Cap ETF IJR and the Vanguard S&P Small-Cap 600 ETF VIOO, both of which track the same index.

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