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World’s Biggest ETF sees Record $21 Billion Flow on Stock Rally
”An unprecedented amount of cash flowed into the world’s largest and oldest exchange-traded fund last week, as stocks rallied to near-record highs after the Federal Reserve indicated it could cut interest rates next year. State Street’s $478 billion SPDR S&P 500 ETF (ticker SPY) raked in $20.8 billion on Friday, the biggest inflow since the fund’s inception in 1993. According to Bloomberg Intelligence, it was the largest one-day flow for any ETF. For the week, the ETF garnered more than $24 billion, also a record, data compiled by Bloomberg showed.”
Super high liquidity, knowing precisely how much cash is in the fund (UIT cash drag can be your friend). Not advantages to the retail investor, but beneficial to large institutions.
Question: Is this possibly owned inside some of the funds / ETFs that invest in a “basket” of other ETFs? If that’s the case, retail investors might be buying it indirectly based on the performance of one of those funds having a completely different name (and a much broader portfolio composition).
Further: If someone had been shorting the S&P wouldn’t they do it with a fund like SPY? If so, in covering their shorts wouldn’t they be put in a position of buying it? -
This excerpt from article might address @davidrmoran’s question:
”Friday was the final trading day before the S&P 500 and Nasdaq 100’s rebalancings went into effect, which can prompt funds managing trillions of dollars to readjust to align with new index compositions. Roughly $5 trillion of options also expired on the same day, which generally sees Wall Street managers roll over existing positions or start new ones.”
For retail investors, there are many low-cost SP500 ETFs now, SPLG (2 bps; newer from S&P itself), IVV (3 bps), VOO (3 bps) the old S&P SPY (9 bps). They aren't trading in millions/billions as institutions are.
If it’s “the world’s biggest ETF …”somebody owns it!
Even large institutions (pension funds, college endowments, insurance companies, investment banks, hedge funds, mutual funds) eventually derive their investable assets from the public in some form, albeit indirectly.
I know it's pretty simplistic but could it be that all that cash that has been resting on the sidelines expecting a Great Recession or chasing down treasuries, CD's and all like that has decided to park itself in the better looking windows? YTD, "SPY up +25.4% and the QQQ's up +53.7%, investors DO notice."
@Mark, think you are spot on. It was “risk on” and now is “risk off” situation in addition to a rate cut in 2024. 10 years treasury yield have fallen to 4%, and bonds took off too.
I am cautiously optimistic that we will have a decent year.
Quote: "Are Fund Flows a Reliable Investment Indicator? As it turns out, interpreting fund flows and their relationship with performance isn't cut and dry, and trends have emerged that call the signaling power of flows into question. For example, persistent outflows have plagued U.S. equity funds even during periods of strong market performance."
Remember, the SP500 is up at least 80% of the years since 1980.
Comments
https://www.etf.com/sections/features-and-news/why-spy-king-liquidity
Question: Is this possibly owned inside some of the funds / ETFs that invest in a “basket” of other ETFs? If that’s the case, retail investors might be buying it indirectly based on the performance of one of those funds having a completely different name (and a much broader portfolio composition).
Further: If someone had been shorting the S&P wouldn’t they do it with a fund like SPY? If so, in covering their shorts wouldn’t they be put in a position of buying it?
-
This excerpt from article might address @davidrmoran’s question:
”Friday was the final trading day before the S&P 500 and Nasdaq 100’s rebalancings went into effect, which can prompt funds managing trillions of dollars to readjust to align with new index compositions. Roughly $5 trillion of options also expired on the same day, which generally sees Wall Street managers roll over existing positions or start new ones.”
That is, assuming you're not kidding.
Even large institutions (pension funds, college endowments, insurance companies, investment banks, hedge funds, mutual funds) eventually derive their investable assets from the public in some form, albeit indirectly.
I am cautiously optimistic that we will have a decent year.
Quote: "Are Fund Flows a Reliable Investment Indicator? As it turns out, interpreting fund flows and their relationship with performance isn't cut and dry, and trends have emerged that call the signaling power of flows into question. For example, persistent outflows have plagued U.S. equity funds even during periods of strong market performance."
Remember, the SP500 is up at least 80% of the years since 1980.