'SPY' Assets On Cusp Of $200B

The SPDR S&P 500 (SPY | A-97) is arguably the most important ETF in the world. Launched in January 1993, it was the first U.S.-listed exchange-traded fund. Thanks to that head start, today the fund boasts more assets than the next three largest ETFs combined.

On Friday, SPY reached rarefied territory, hitting $198.9 billion in assets. A record high for the ETF's underlying index―the S&P 500―as well as strong recent inflows helped push SPY close to the $200 billion milestone.

The fund's assets have nearly doubled in the past four years, and have quadrupled in the past 10 years.

Not The First Time

With nearly $200 billion in assets, SPY is in rarefied air for any fund, not just an ETF. According to Bloomberg, only three mutual funds have assets exceeding that amount: the Vanguard Total Stock Market Index ($378 billion), the Vanguard Institutional Index Fund ($204 billion) and the Vanguard Total International Stock Index Fund ($201 billion).

But this isn't the first time SPY's assets have flirted with the $200 billion level. The fund's AUM reached its peak back in December 2014 at $219 billion.

SPY Total Net Assets

Even though the S&P 500 is now a few percentage points higher than it was back then, SPY lost billions in assets from outflows. In 2015, redemptions in the fund totaled $30.2 billion, as investors turned to competing ETFs.

2015 Fund Flows

Now, however, the ETF is making a comeback with investors. In July, $14.7 billion flowed into the fund, bringing its year-to-date tally into positive territory.

2016 Fund Flows

Unrivaled Liquidity

There's reason to believe SPY's comeback may continue.

As the world's largest ETF, SPY is a favorite among investors and traders alike. It's 0.09% (9 basis points) expense ratio is among the cheapest of any exchange-traded product, though it's a tad higher than competitors such as the Vanguard S&P 500 Index Fund (VOO | A-96) at 0.05% and the iShares Core S&P 500 ETF (IVV | A-96) at 0.07%.

But where SPY makes up for it is in unrivaled liquidity and the deepest options market of any stock or ETF.

On Monday alone, almost $16 billion worth of SPY shares traded hand, four times the dollar value of the next ETF on the list, the iShares Russell 2000 ETF (IWM | A-93), which traded $4 billion (the most actively traded single stock, Apple, also traded $4 billion worth of shares).

Meanwhile, open interest on SPY options totaled 22.6 million contracts as of last month, according to Optionistics. Again, that's the most of any ETF or stock by far.

S&P 500 The Key

SPY's dominance during the past 23 years and counting has been in large part thanks to its underlying index, the venerable S&P 500.

The S&P 500 is the go-to index for exposure to U.S. equities. As long as that remains the case―and as long as it performs well―SPY should benefit.

In the past 7 1/2 years, the S&P 500 has seen one of its greatest rallies of all time, rising 273%. But before that, the worst financial crisis since the Great Depression wiped out more than 50% of the index's value between 2007 and 2009.

S&P 500 The Key

SPY's assets likewise fell precipitously, from a high of $92 billion in the fall of 2007 to $55 billion in March 2009.

It's been a bumpy ride for SPY to get where it is today. Likewise, the march to even higher asset totals―$300 billion or more―won't necessarily be smooth and will largely depend on where the S&P 500 goes from here.

Contact Sumit Roy at [email protected].