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State Street Undercuts BlackRock, Vanguard With Cheapest S&P ETF

SSGA lowered expense ratios on 10 ETFs with $78 billion in assets this week. Over the past year, it has lowered fees on 20 funds.

(Bloomberg) -- State Street Global Advisors is challenging larger exchange-traded fund rivals BlackRock Inc. and Vanguard Group Inc. with its latest round of fee cuts. 

The asset manager announced Tuesday that it lowered expense ratios on ten ETFs with $78 billion in assets, including the $20 billion SPDR Portfolio S&P 500 ETF (ticker SPLG), according to a press release. SPLG’s new fee of just two basis points clocks in a hair below the three basis points charged by the $357 billion iShares Core S&P 500 ETF (IVV) and the $340 billion Vanguard S&P 500 ETF (VOO). 

It’s an aggressive volley by State Street, which helms the $434 billion SPDR S&P 500 ETF Trust (SPY), the oldest and largest ETF. Even still, the asset manager has been ceding market share in the $7.6 trillion industry for two decades. 

Tiny fee cuts have become common as issuers battle for flows in an increasingly saturated market, with the likes of BlackRockVanguard and Charles Schwab Corp. unleashing similar reductions of just a couple basis points over the past few years. 

“In the ETF world, even one basis point can move the needle on flows,” said Eric Balchunas, senior ETF analyst at Bloomberg Intelligence. “I suspect this will help SPLG, although likely not to the point where it is a real threat to the Three Amigos — SPY, IVV, VOO.”

State Street has lowered fees on 20 ETFs over the past two years, according to the press release. SPLG is the largest ETF included in Tuesday’s cuts, followed by the nearly $17 billion SPDR Portfolio Developed World (ex-US) ETF (SPDW), which now carries an expense ratio of three basis points. The $1.4 billion SPDR Portfolio High Yield Bond ETF (SPHY) saw the biggest reduction, with its fee dropping to five basis points from 10 basis points on Tuesday.

The latest round of ETFs to have fees lowered are part of State Street’s so-called SPDR Portfolio suite — a stable of low-cost funds spanning equities and fixed income meant to form the building blocks of a portfolio. 

“We believe that as the core is typically the largest part of a portfolio, it’s important to use cost-effective solutions over the long term,” said Sue Thompson, head of SPDR Americas Distribution at State Street Global Advisors, in Tuesday’s release.

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