Gold SPDR Close To Overtaking SPY As Largest ETF In The World

by on August 15, 2011 | ETFs Mentioned:

The turmoil endured by global markets over the last several weeks has left many portfolios drenched in red, as major indexes around the globe have been hammered mercilessly. The surge in volatility has also led to a pike in the use of ETFs, as the percentage of trades conducted in exchange-traded products skyrocketed in recent sessions as markets whipsawed violently. Perhaps not surprisingly, billions of dollars have flowed out of ETFs over the past few weeks as investors have fled from risky assets.

But just as some exchange-traded products have posted some huge gains–several tacked on 45% or more during a one week stretch–some have seen huge cash inflows. Investors running for the exits of stocks and commodities have piled into safe havens such as government bonds and gold. And as a result, there has nearly been a shift at the top of the ETF industry; we’re on the verge of a changing of the guard for the title of “largest ETF in the world.”

That title has been held since the early days of the U.S. ETF industry by the S&P 500 SPDR (SPY), the oldest U.S.-listed ETF that follows one of the best known stock market benchmarks. At the end of July SPY had assets of more than $93 billion according to the National Stock Exchange, making it about $27 billion larger than the next closest product. That size advantage was held over the Gold SPDR (GLD), which holds bars of gold bullion in secure vaults.

Just as billions of dollars in market cap were wiped out in a few wild days, the seemingly huge gap between these two funds dwindled over a relatively short period of time. At the end of last week’s trading, SPY’s assets had shrunk to about $73.8 billion according to State Street, a result of both sinking asset prices and outflows from the popular equity fund. Interest in gold, meanwhile, was red hot; inflows into GLD accelerated, and the fund hit about $73.9 billion on Wednesday of last week, before sliding back to finish Thursday’s session with about $72 billion. The $27 billion gap deflated to less than $2 billion, though equity market rallies to close out the wild week added some additional cushion between the two. So for now, SPY hangs on to its title of the king of the ETF ring, though GLD is now nipping at its heels and in a position to overtake the fund if another sell-off materializes.

The steep decline in SPY’s assets during the first ten days of August translated into a loss of about $17 million annually in management fees for the fund; the jump in GLD’s AUM gave a boost of about $30 million on an annual basis (SPY charges 0.0945%, while GLD charges 0.40% in expenses).

Disclosure: No positions at time of writing.