State Street Cuts Fees on 10 ETFs as Price War Heats Up

State Street Global Advisors, the world’s third largest ETF manager, with $3.8 trillion in assets under management, fired the first shots of a new exchange-traded fund fee war with cuts to 10 of its SPDR series of ETFs. 

The issuer chopped the fees for 10 of its ETFs, including the $20 billion SPDR Portfolio S&P 500 ETF (SPLG) and the $17 billion SPDR Portfolio Developed World ex-US ETF (SPDW). The cuts bring an equal-weighted average of the 10 funds’ fees down from 0.065% to 0.039%, a 40% decrease. 

The cuts are the latest example of the never-ending ETF fee war, The ETF Store President Nate Geraci said in an email: “The ETF industry is ruthless when it comes to competitive fee pressure.” 

Sue Thompson, head of SPDR Americas Distribution at State Street Global Advisors, said low-cost ETFs are attractive to buy-and-hold investors who want to limit the impact of fees on the long-term performance of their portfolio.  

The cuts affect $78 billion in assets under management, only 2% of State Street’s AUM, and 7% of the firm’s $1.1 billion in ETF assets.  

ETF Fee Cuts 

None of the funds with fee cuts is in State Street’s top 10 funds, with the largest, SPLG, clocking in at 11th place. Only one other, SPDW, cracked the top 20.  

SPLG was started as a cheaper, retail-oriented version of State Street’s largest ETF, the $428 billion SPDR S&P 500 ETF Trust (SPY). SPY, with a 0.09% expense ratio, is now more than quadruple SPLG’s price. 

Before this latest flare-up in the fee war, one of the last big moves was in 2019. In that one, issuers imposed cuts that saved investors $95 million over the course of the year, according to FactSet Insights. They also dropped fees on 31.5% of overall ETF assets.  

That was also the year when the Vanguard 500 Index Fund (VOO) dropped to its current expense ratio of 0.03%, one that was matched by its competitors, including SPLG, until today.  

The cut makes SPLG the cheapest S&P 500 ETF, but based on prior experience, cuts to other consumer-facing index ETFs will likely come soon. Funds will want to combat investors moving to cheaper options, as all S&P 500 index ETFs are largely fungible.  

Contact Gabe Alpert at [email protected]