ETF Trends CEO Tom Lydon discussed the SPDR Portfolio S&P 500 ETF (SPLG) on this week’s “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show.
The SPDR Portfolio Large Cap ETF seeks to provide investment results that, before fees and expenses, generally correspond to the total return performance of the Russell 1000 Index. 2017-10-16: Formerly known as SPDR Russell 1000 ETF.
SPLG is a cheaper, modernized S&P 500 alternative to the flagship SPDR S&P 500 ETF Trust (SPY). State Street Global Advisors already offers SPY, so one may wonder what the point of SPLG is.
Well, according to Lydon, SPLG could be a better way for long-term investors who want strategic exposure to the S&P 500. SPLG is starting to gain traction among ETF investors. It has reached $700 million net inflows for the week ended February 21, while SPY went -$2 billion net outflows for the same week.
Inspecting the SPY ETF
In regards to SPY, it’s the largest ETF by assets under management with robust trading volumes. It’s a go-to, quick-and-easy way for large institutional investors to weave in and out of the markets. However, SPY is the oldest ETF and has an antiquated structure.
The ETF is set up as a unit investment trust, which puts it at a disadvantage relative to other S&P 500 funds. Managers cannot use index futures to manage cash, are restricted from immediately reinvesting dividends, and are unable to engage in securities-lending. These features, along with a modestly higher fee, have resulted in inferior long-term tracking performance relative to other S&P 500 tracking funds. But these shortcomings may be overlooked by large institutional investors that are just looking to make short-term, tactical moves.
On the other hand, long-term investors may be better off with SPLG. SPLG has a 0.03% expense ratio vs SPY’s 0.0945%. The long-term investors are more interested in a cheaper expense ratio. Long-term investors may also benefit from any potential securities lending that would help keep SPLG closer to its benchmark over time.
Also of note, SPLG was previously known as the SPDR Portfolio Large Cap ETF (SPLG) but changed over to the SPDR Portfolio S&P 500 ETF late January. It now tracks the S&P 500 Index. However, while SPLG has the same underlying index as SPY, SPLG is not required to hold all the securities and may use a sampling methodology to mirror the same risk and return characteristics.
Listen To Tom Lydon Talk SPLG:
For more podcast episodes featuring Tom Lydon, visit our podcasts category.