Recent call buying in SPDR Gold Shares (NYSEArca: GLD) in the options market has us reflecting on two summers ago in 2010.
Then, we began to witness a migration of assets to some degree away from the second largest ETF in terms of assets under management in the U.S. marketplace, GLD, to a competing fund, iShares Gold Trust (NYSEArca: IAU).
Currently, GLD has a staggering $65 billion in AUM versus IAU’s $9.5 billion, but slowly but surely it appears that the majority of significant inflow activity in IAU is “buy and hold” if not longer term purchases by both retail and institutional investors, and it seems that the public is taking advantage of IAU’s lower expense ratio (25 bps versus GLD’s 40 bps).
While it is true that GLD trades more volume on an average daily basis (as well as dollar notional volume since GLD has a $157 handle versus IAU’s $15 handle) at 9.7 million shares per day and IAU trades on average 4.9 million shares, from an underlying liquidity/ease of trading standpoint, there are no significant differences in terms of quality of trade execution that we have observed at this time, assuming the investor or portfolio manager is utilizing the proper trading techniques as well as the expertise of a liquidity/trade execution desk where necessary (i.e. block pricing, larger share orders, execution measured against relevant benchmarks such as VWAP, TWAP, etc.).
In addition to cost savings in terms of expense ratios, we believe that institutional investors have noted live performance differentials in the two funds at this juncture as well.