SPY Helps State Street Top Vanguard in Monthly Flows

State Street Global Advisors led all ETF issuers in September with $18.4 billion in net inflows, according to Morningstar's latest flows report, the most recent example of how the $588 billion SPDR S&P 500 ETF Trust (SPY) impacts flows at the third-largest ETF issuer.

State Street's SPY, which trades $30 billion in 500,000 trades on an average day, took in $16 billion in September, according to State Street.

A month ago, Morningstar highlighted nearly $27 billion worth of net outflows from SPY this year through August and illustrated how the world’s first and largest ETF has become the tail wagging the dog at the $1.3 trillion ETF issuer.

Morningstar’s report even called out SSGA’s $8.1 billion worth of inflows over the first eight months of the year as putting the issuer on track for its worst year for net inflows since 2018.

September Flows

Source: Morningstar

But this is mostly noise to Matthew Bartolini, head of SPDR Americas Research at SSGA.

“SPY stands alone,” he said. “We deeply understand the buying behaviors of SPY and we know there will be a boost in September.”

Citing typical trading and rebalancing activity during the final quarter, Bartolini shrugged of the ebb and flow of SPY’s net flows as “seasonality and structural trends.”

“For example, we had a gigantic fourth quarter in 2023, so we know our January will be effected by that,” he said. “We understand it and can say those numbers are what they are.”

Bond ETFs Rake in Billions

Beyond the ongoing SPY saga, the latest data from Morningstar illustrates a steady and continued appetite for fixed income funds over equities.

Taxable bond ETFs stood out with $93 billion worth of net inflows during the third quarter.

ETFs overall have taken in nearly $685 billion this year, including $95.6 billion in September.

Of those inflows this year through September, $490 billion went into passive strategies and $193 billion went into active strategies.

On the lopsided flows into bond ETFs, Ryan Jackson, Morningstar’s senior manager research analyst, said there are multiple drivers.

“We’re looking at a backdrop of a pretty friendly time to invest in bonds,” he said, adding that the extended bull market for equities is fueling some portfolio rebalancing out of stocks and into bonds.

The start of interest rate cuts this year has also given investors a reason to start moving down the yield curve, Jackson said.

“For the better part of the past two years investors were all in on bond portfolios because investors were putting money into longer term bond funds in anticipation of rate cuts,” he said. “We’ve gone from anticipating rate cuts to actually experiencing them.”