The first U.S.-based exchange-traded fund hit a major milestone on Thursday, following recent all-time highs for the
What Happened: Launched in January 1993, the SPDR S&P 500 ETF Trust (NYSE:SPY) is the oldest U.S.-based ETF and the largest by assets under management.
The ETF reached the $600 billion assets under management milestone Thursday, according to data from ETFDB.
Managed by State Street Corporation (NYSE:STT), the ETF was launched with seed funding of $6.5 million after being approved by the U.S. Securities and Exchange Commission in 1993, after several years of the fund's application.
Initial interest in the ETF was poor and the fund was almost closed before investors came around to the idea of using ETFs as investment vehicles.
The success of the SPY ETF led to other financial institutions launching similar ETFs that track the S&P 500 Index, one of the largest and most well-known stock market indexes.
The iShares Core S&P 500 ETF (NYSE:IVV) and Vanguard S&P 500 Index Fund ETF (NYSE:VOO) launched in 2000 and 2010, respectively.
Today, the three ETFs that track the S&P 500 are the largest in the world, according to ETFDB, with the following assets under management:
- SPY: $600 billion
- IVV: $544.5 billion
- VOO: $544.1 billion
Based on the metrics above, SPY's time as the only ETF with $600 billion in assets under management may be short-lived, with the two other large S&P 500 ETFs closely behind. Back in January when the SPY celebrated its 31st anniversary, the assets under management were:
- SPY: $474 million
- IVV: $405 million
- VOO: $377 million
The difference from January to October shows the strong volume inflows the S&P 500 ETFs are seeing.
Why It's Important: The S&P 500 has set several all-time highs in recent months and the SPY is currently up 23.6% year-to-date in 2024. This year's gain builds on a strong 2023 when the S&P 500 surged over 20%.
Over the last five years, the SPY has averaged a gain of 13.2%. Since its inception, the SPY has averaged an annual return of 10.4%.
One factor that might attract inflows to S&P 500 ETFs in 2024 is that it is a presidential election year.
According to Barchart, the S&P 500 has posted gains in 13 of the last 15 presidential election years. The only two presidential election years in the previous 60-plus years that saw the S&P 500 down were the global financial crisis and the dot-com bubble.
The average return of the S&P 500 in the presidential election years is 10.5%. Stripping out the global financial crisis and the dot-com bubble, the S&P 500 gained an average of 15.3%. The average gain in presidential election years is higher than the historical average since the SPY’s inception, with or without the financial crisis and the dot-com bubble stripped out.
Strong net inflows for the SPY ETF have helped State Street in recent months. According to a Morningstar report, for the month of September, State Street led the way with $18.4 billion in net flows. The SPY ETF had net inflows of $16 billion in September. State Street topped Vanguard ($17.3 billion) and iShares ($9.9 billion) for September net inflows for ETF companies.
SPY Price Action: The SPY is trading at $584.08 at the time of writing, compared to a 52-week trading range of $409.22 to $586.12.
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Image created using artificial intelligence via Midjourney.
