State Street Corp. (SST), the third-largest ETF issuer, reported that first-quarter net flows into its exchange-traded funds dropped sharply from the previous quarter, largely a result of investors pulling billions from its flagship SPDR S&P 500 ETF Trust (SPY).
Net flows at Boston-based State Street, which manages $1.3 trillion in 160 ETFs, dropped to just $1 billion from $65 billion in the previous quarter, the company showed in its Thursday earnings release. Net inflows totaled $1 billion in last year’s first quarter, as well.
Investors pulled $20.1 billion from the $559.3 billion SPY over the quarter, as the U.S.’s oldest ETF lost its title as the largest exchange-traded fund to the Vanguard S&P 500 ETF (VOO). While markets tumbled after President Donald Trump unleashed a global trade war and fears of recession jumped, broad index investors largely bought into the decline, choosing to invest in VOO over SPY.
State Street’s fixed-income ETFs brought in a net $9 billion in flows during the quarter. So-called alternative investments, which include real estate investment trusts, gold, currency and commodities, brought in a net $8 billion. Those totals just barely made up for the $16 billion in net outflows from State Street’s equity ETFs.
The U.S. ETF industry’s overall inflows dipped 32% to $291 billion during the quarter from $427 billion in the fourth quarter, State Street said, citing Morningstar Data. Still, they jumped 41% from last year’s fourth quarter total of $191 billion.
State Street’s ETF performance trailed that of rivals BlackRock Inc. (BLK) and JPMorgan Chase & Co. (JPM). BlackRock, whose iShares is the world’s largest ETF issuer, reported $107 billion in total net inflows into ETFs for the quarter.
JPMorgan, the sixth-largest ETF issuer, said first-quarter assets in its ETF business jumped 39% from $172.6 billion in the prior year’s first quarter to $239.9 billion as inflows surged into its biggest funds, including JPMorgan Equity Premium Income ETF (JEPI) and JPMorgan Nasdaq Equity Premium Income ETF (JEPQ).
Source: etf.com data
VOO, with $583.6 billion in assets, charges a 0.03% management fee that’s one-third of SPY’s 0.09%. SPY is often seen as more popular with institutional investors due to its unit-investment trust structure, requiring it to hold dividends in cash until distribution. VOO is open-ended with the flexibility to reinvest dividends immediately.
SPY had been surpassed for a time by the iShares Core S&P 500 ETF (IVV), which pulled in a net $21.8 billion over the quarter.
