SPY First ETF to Reach $500B in Assets

SPDR S&P 500 ETF Trust (SPY) became the first ETF in history to hit a half-trillion dollars in assets under management on Thursday.

SPY, which gives investors exposure to some of U.S.'s largest companies through a market cap weighted tracking of the S&P 500 index, reached $502 billion in AUM shortly before markets closed for the day, State Street Corp., the issuer of the fund said. (AUM was at $493 billion after market close on Friday, according to etf.com data). 

The fund, which started trading in 1993, has been the world's largest for AUM and a long-time golden goose of State Street, the world's third largest ETF issuer. 

"$500 billion is an incredible milestone of SPY and is indicative of the incredible growth that the ETF industry has seen," etf.com analyst Sumit Roy said. "It’s only a matter of time before SPY or one of its S&P 500 rivals becomes the first trillion-dollar fund."

Spurred by positive earnings from large tech companies such as Nvidia and Amazon, the U.S. stock market has continued its nearly yearlong rally, pushing assets in ETFs to new heights. 

The S&P 500 index broke the 5,000 level, a symbolic milestone for investors, on Feb. 9. The index has gained over 7% this year so far, adding to its roughly 25% gains from last year. The ETF industry reached a record $11.7 trillion in global assets at the end of January.

Despite geopolitical uncertainty, investors have piled into high flying technology stocks, particularly companies benefiting from surging interest in artificial intelligence technology. 

In an interview with etf.com, Matt Bartolini, head of SPDR Americas Research, highlighted the fund's liquidity as a driver of its growth and staying power. "SPY is being utilized by a wide, diverse group of investors with different buying behavior motivations,” he said. 

Tech Overexposure?

To be sure, the stock rally doesn’t necessarily foreshadow wider market gains ahead, said Liz Young, investment strategist at SoFi Technologies Inc. A small group of tech stocks driving a rally leaves other economic indicators out of the equation.

“If the economy is in fact, in an expansion, you need confirmation from other parts of market participating in things like transportation stocks and small caps, and that’s some of the stuff we haven’t really seen happen yet,” Young said at a Feb. 22 company event at the NYSE. “I hope that many of you are riding that [tech stock] wave but being careful to know that wave is very concentrated, and anytime that there’s such a wide bifurcation in the market, it unfortunately usually ends in pain,” she added.

While SPY has been on an upward performance trajectory, it has also been bleeding cash. Investors have pulled $27 billion from the fund so far this year, according to etf.com data. Bartolini said the outflows are expected and related to seasonality shifts. 

Contact Lucy Brewster at [email protected].