Europe's 'SPY' Pulls In €1 Bln After Fee Cut

State Street Global Advisors has pulled in more than €1 billion into its European S&P 500 ETF since a price cut made the fund Europe's cheapest in its category, outgunning rivals BlackRock Inc., Vanguard Group and Invesco Ltd.

The SPDR S&P 500 UCITS ETF (SPY5)—which slashed fees from 0.09% to 0.03% on October 23—recorded €1.1 billion in inflows from the date of the announcement through November 17, according to Morningstar data.

The Vanguard S&P 500 UCITS ETF (VUSA)—with a total expense ratio of 0.07%—was closest with €839 million of 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 €512 million and €484 million, respectively.

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 €5 billion to €6.5 billion since the move, although it remains significantly behind its three rivals.

"SPY" ETF Fee Cut Sparks Inflows

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 program, along with 66 other ETFs, in a bid to make the move more economically viable.

“The investor response has indeed been very positive across the U.K. and Europe," Matteo Andreetto, head of SPDR EMEA business at SSGA, said. "Our ability to provide an institutional quality investment solution at this competitive price point is highly compelling for investors.”

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," he said. "Existing holders of their instruments are likely to want clarity on this sooner rather than later."

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.

“For new money requiring physical exposure, 0.03% would seem like a fairly clear choice," Wayne Nutland, fund manager, Premier Miton Investments, said. "Investors will need to consider switching costs but the S&P 500 is typically a very low-cost exposure to trade."