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Simultaneous Mega ETF Trades Hint at S&P 500 Index Funds Switch

Claire Ballentine and Bloomberg Automation

(Bloomberg) -- Investors seeking exposure to the S&P 500 may be dumping one long-favored exchange-traded fund for its cheaper sibling.

State Street Corp.’s SPDR Portfolio S&P 500 ETF, ticker SPLG, gained $662 million on Thursday, its biggest one-day inflow on record, according to data compiled by Bloomberg.

The money could be coming at the expense of the legendary SPDR S&P 500 ETF Trust, or SPY, which has a higher expense ratio at 0.095% than SPLG at 0.03%. Last month, State Street changed SPLG’s underlying benchmark to the S&P 500 Index instead of its previous SSGA Large Cap Index. That means investors can get a similar exposure as SPY but at a lower cost.

About $657 million worth of SPLG shares hit the tape at 3:49 p.m. in New York Thursday. At the same time, $422 million worth of SPY shares were traded.

The flows represent a bigger quandary that issuers in the $4.7 trillion industry are grappling with as a fee war continues: the risk that decreasing the cost of one fund could take away flows from a pricer product. For example, BlackRock Inc.’s iShares Broad USD High Yield Corporate Bond ETF pulled in $1.4 billion this year while its similar, yet pricer, fund the iShares iBoxx High Yield Corporate Bond ETF lost $830 million.

“While SPY still has an edge for higher trading volume and tighter bid/ask spreads, for buy-and-long-term-hold investors SPLG makes a lot of sense,” said Todd Rosenbluth, CFRA Research’s New York-based director of ETF research.

Following are the fund’s biggest holdings as of Feb. 13:

To contact the reporter on this story: Claire Ballentine in New York at cballentine@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Dave Liedtka, Randall Jensen

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