Happy birthday, SPDR S&P 500 ETF Trust (SPY )! The granddaddy of all ETFs just turned 30 and was the subject of this week’s “ETF of the Week” podcast. VettaFi’s vice chairman Tom Lydon discussed the strategy with Chuck Jaffe of “Money Life” for this week’s pod.
Serenaded by Paul McCartney’s rendition of “Happy Birthday,” and perhaps “The Beatles of ETFs,” Jaffe and Lydon took the time to reflect on just how far SPY has come.
“It’s crazy to think 30 years ago when the first U.S. ETF started by State Street Global Advisors, it was a small group of people and coming out of the big correction we saw in 1987, the group and the industry tried to find other ways of liquidity,” Lydon said.
“Liquidity really should be the middle name of SPY, because that’s what it’s all about. From a liquidity standpoint, this is really its claim to fame. It trades $39 billion in money every day, which is unbelievable when you think about it,” he added.
While there are other strategies out there that have tried to replicate SPY by tacking the S&P 500, SPY’s tight, consistent spreads – trading at a penny – are traits that “most other ETFs could only dream of replicating.”
Jaffe noted in return that SPY as much as any ETF inspired index pioneer and Vanguard founder Jack Bogle in his dislike for ETFs, as he didn’t want index funds to be used the way the SPDR is used. The pair spoke to the use cases for SPY, and how it holds up compared to other low fee S&P 500 ETFs as a long term hold compared to its tradability as well as whether SPY’s descendants can beat their much-vaunted ancestor.
“What we’re doing here is tipping our caps, Chuck, to what State Street Global Advisors and the team that crated SPY did 30 years ago, it’s pretty impressive,” Lydon said. “This is what the ETF industry was built on and today we continue to see more and more innovation – but if we hadn’t experienced all the success that this group had 30 years ago, we may not be where we are today.”