State Street to Merge Small Cap ETFs into $7B Behemoth 

A $1.8 billion fund will be merged into a $5.2 billion fund.

Reviewed by: Heather Bell
Edited by: Heather Bell

State Street Global Advisors will be merging its two exchange-traded funds that track the S&P SmallCap 600 Index. On or around June 9, the $1.8 billion SPDR S&P 600 Small Cap ETF (SLY) will be acquired by the $5.2 billion SPDR Portfolio S&P 600 Small Cap ETF (SPSM).  

SLY, which launched in 2005 but only adopted the S&P SmallCap 600 Index as its benchmark in 2010, is being folded into SPSM, an essentially identical fund with an expense ratio of just 0.05%, 10 basis points cheaper than the 0.15% charged by SLY. SPSM is part of State Street’s “Portfolio” series of ETFs that is marketed to the advisor audience and generally has lower expense ratios. It launched in July 2013. 

SLY has nominally been a part of the same suite of ETFs as the $360 billion SPDR S&P 500 ETF Trust (SPY) and the $19.9 billion SPDR S&P Midcap 400 ETF Trust (MDY), despite launching much later. However, SLY is structured as an open-ended fund rather than a unit investment trust, the underlying structure for both SPY and MDY. 

Merging SLY into SPSM makes sense. Both SPY and MDY are large funds that are popular tools for traders, who are less concerned with their higher expense ratios, but SLY has never gained the heft to serve a similar purpose. At more than $5 billion, SPSM dwarfs its more expensive twin.  

SPSM also has better trading data. SLY’s spread of 0.15% is five times that of SPSM, while SPSM’s average daily dollar volume of $32.9 million is more than three times that of SLY. 

There are two other ETFs tracking the S&P SmallCap 600 Index, including the $71 billion iShares Core S&P Small-Cap ETF (IJR) and the $2.4 billion Vanguard S&P Small-Cap 600 ETF (VIOO), which have expense ratios of 0.06% and 0.10%, respectively.  

The merging of SLY and SPSM not only bulks up the size of the cheaper ETF in State Street’s lineup, making it more appealing to the overall market, it removes SLY, a less competitive product in a crowded field, from the issuer’s lineup. 


 Contact Heather Bell at [email protected] 

Heather Bell is a former managing editor of She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.