Why a Popular S&P 500 ETF is Losing to Competitors

The S&P 500 exchange traded funds have been a mainstay in many retail investor, financial advisor and and institutional investment portfolios, but ETF flows reveal that traders are growing increasingly more selective when picking out the right tool.

The SPDR S&P 500 ETF (NYSEArca: SPY), the world’s largest ETF by assets, is losing ground to rivals managed by BlackRock and Vanguard, report Joe Rennison and Robin Wigglesworth for the Financial Times.

Investors have yanked about $10 billion out of SPY while its chief competitors, the iShares Core S&P 500 ETF (NYSEArca: IVV) and Vanguard 500 Index (NYSEArca: VOO), which also track the S&P 500, have attracted $14 billion and $7 billion in net inflows year-to-date, respectively.

SPY’s current woes are partly attributed to the shift in investment sentiment. Specifically, large asset managers, who have been known to use SPY for its robust liquidity, are switching their money from U.S. equities into Europe where a combination of diminished political risk and improving growth expectations are enticing greater investment interest. For example, at the recent SALT conference in Las Vegas, a number of hedge fund managers have extolled the potential opportunities in European assets over U.S. markets.

On the other hand, the ongoing uncertainty surrounding President Donald Trump’s ability to deliver on a number of pro-growth policies, such as deregulation, tax cuts and fiscal spending, have diminished the appeal of U.S. equities.