State Street’s SPY ETF sees record $32bn outflows despite market rally

State Street’s flagship S&P 500 ETF, known as SPY, has suffered record outflows of $32.7 billion this year — the largest in ETF history — despite a 15% rally in the S&P 500 index. The shift highlights intensifying competition in the ETF market and investors’ growing preference for lower-cost options.

Source Financial Times

Rival funds from Vanguard (VOO) and BlackRock (IVV) have surged ahead, attracting billions thanks to ultra-low expense ratios of 0.03%, compared with SPY’s 0.0945%. The rise of cost-conscious retail investors has accelerated the trend, pushing SPY off its long-held throne as the world’s largest ETF.

Despite the losses, SPY remains a top choice for institutional traders due to its deep liquidity and derivatives network. Yet analysts warn that the growing dominance of retail money and cheaper ETFs may permanently redefine the balance of power on Wall Street.