SPY, World’s Largest ETF, Hit by Near-Record Outflows

The world’s largest exchange-traded fund is losing assets at a head-spinning pace this year. Since the start of 2024, investors have pulled $29.2 billion from the SPDR S&P 500 ETF Trust (SPY), the largest outflows of any ETF by far. 

The $29.2 billion is larger than any annual outflow for SPY, other than 2015’s $32.3 billion. 

On the surface, such massive outflows for SPY are strange to see in a year in which the S&P 500 is hitting record highs. But SPY isn’t like most other S&P 500 ETFs. 

A wide range of market participants use the fund to express their views, from short-term traders to long-term investors, and everything in-between. The ETF also boasts the deepest options market of any fund. 

 By contrast, other popular S&P 500 ETFs, like the Vanguard 500 Index Fund ETF (VOO) and the iShares Core S&P 500 ETF (IVV) tend to have a narrower group of holders who are predominantly long-term investors.  

Mostly Inflows 

If you look at the daily, weekly and monthly flows for those ETFs over time, you’ll see a steady stream of inflows, interspersed with the occasional outflow; while on an annual basis, they rarely see money leave. 

For instance, since its 2010 unveiling, VOO has never had an annual outflow, while IVV has experienced one annual outflow since it debuted in 2000. 

 By contrast, since its 1993 start, SPY outflows have occurred in over one third of all years.  

The difference in the pattern of flows between SPY and IVV and VOO reflects their respective investor bases. 

The short-term traders who use SPY as a tool to quickly enter and exit the stock market cause large swings in the ETF’s flows.  

A lot of those traders piled into the fund late last year, causing SPY’s annual inflows for 2023 to balloon to a record $48.1 billion. This year, they’re removing money from the ETF, perhaps to deploy elsewhere or just to take profits.  

In other words, this year’s outflows from SPY aren’t a knock against the ETF, but rather underscore the broad diversity of individuals and institutions who use the fund.