The itsy-bitsy SPDR went off the ETF.

The company behind the world’s first ETF recently removed SPDR from 15 funds and replaced it with State Street. It also added State Street to dozens of others without trimming SPDR from the name. The changes follow the company’s wider rebranding earlier this year, when it switched from State Street Global Advisors, which it often abbreviated as SSGA, to State Street Investment Management.

“There was potentially some confusion in the market. What’s SSGA? … What’s a global advisor?” Allison Bonds Mazza, head of US Wealth at State Street Investment Management, told ETF Upside at the Charles Schwab Impact conference in Denver. “We were trying to create some clarity around the brand.”

World Wide Web

A fun (but sadly inaccurate) myth is that a person is almost never more than three feet from a spider. It might be truer that in a crowd, someone’s near a person whose portfolio includes SPDR ETFs. State Street is the third-largest ETF issuer by assets, with about $1.8 trillion across 175 US products. The firm brought the first US ETF to market in 1993, with the S&P 500 Depository Receipt, which is where the SPDR acronym comes from. Of course, that product is today known as the SPDR S&P 500 ETF Trust (SPY), and at $700 billion in assets under management is the company’s largest and the third-biggest in the US. Unlike most of the companies awaiting approval by the Securities and Exchange Commission for ETF share classes of mutual funds, State Street is going the other way, with plans to roll out 401(k)-friendly mutual fund share classes of its ETFs, Bonds Mazza noted. That would give the company a massive new distribution opportunity for the popular, low-cost retail strategies currently available only as ETFs.

It’s not the first time State Street has renamed a range of ETFs:

• Back in 2007, the company brought its streetTracks line of ETFs under the SPDR name.
• That, like this year’s rebranding, was intended to make the products more identifiable with State Street, according to a Reuters report at the time.

SPY vs. SPYM

SPY was not affected by the rounds of name changes, although its cousin, the State Street SPDR Portfolio S&P 500 ETF (SPYM), was. This year, there has been plenty of attention on SPY, which has seen more than $20 billion in net outflows year to date, according to data from VettaFi, as rivals like iShares Core S&P 500 ETF (IVV) and Vanguard S&P 500 ETF (VOO) have raked in new money, at $32 billion and $105 billion, respectively. But that story has ignored the growth of SPYM, which charges 2 basis points compared with SPY’s 9 but has a different use case, Bonds Mazza said. Year to date, that ETF has brought in $30 billion.

“I don’t know why SPYM is an undertold story,” she said. “I think we’re taking market share from VOO and IVV.”

They’re young, and they’ve got the skills, and the bills, to beat the market … or so they say.

Seven in 10 millennial ETF investors told Charles Schwab that they are capable of outperforming the market. However, just over half also said they tactically invest, trading to take advantage of opportunities. Most finance pros can’t outperform over time, but maybe the youth have an inside track. Or maybe with age comes wisdom: Fewer Gen Xers and Baby Boomers made such claims, with 53% and 36%, respectively, boasting of market-smashing prowess. They’ve been around long enough to get burned, or at least see it happen to their peers.

“When many of those millennials came into investing, many of them weren’t deeply invested during any significant market downturn,” David Botset, head of strategy, innovation and stewardship at Charles Schwab Asset Management, told ETF Upside at the firm’s Impact conference in Denver. “It will be interesting to see what the [future] data shows if we go through an extended period of downside.”

Diversifying with Niche Funds

It’s not just investment confidence. There are correlations between generation and taste for alternatives and niche ETFs, according to the survey, which included 1,000 ETF investors and 1,000 who don’t own ETFs. Millennials’ interest in such products “in many respects aligns with being more curious about investment opportunities,” Botset said. But there is now, more than ever, an abundance of ETFs focused on single stocks, crypto, real assets and alternatives, and “it’s also about availability.”

Some of the wider findings:

• 62% of ETF investors said they are considering putting the entirety of their portfolio in ETFs.
• 27% of their investments are in ETFs, on average, but they expect that to increase to 34% in five years.
• The biggest sources of funding for new ETF purchases would be individual stocks (62%), mutual funds (52%), individual bonds (40%) and new cash (38%).

Thrift Shop: Among the biggest factors across all generations in choosing specific ETFs is cost, and concern about it ranks highest among millennials, 28% of whom cited it as their most signficant consideration (compared with 16% of Xers and 7% of Boomers). Overall, investors showed a preference for passively managed funds, but that varied by asset class. While passive was the top choice for US equity, fixed income, developed markets equity and crypto, people leaned toward active for emerging markets equity and alternatives. Still, the explosion of active ETFs has presented a lower-cost option for investors who have eschewed active management in the past, in vehicles like traditional mutual funds, Botset noted.

“It’s one of those things that appear to be making active strategies more acceptable to investors, because they are now coming with a lower cost.”

Star Trek’s Captain Kirk called space the final frontier. For ETFs, it’s just the latest one.

Tidal Financial Group filed last week for approval of its Beyond Earth ETF, an actively managed fund investing in companies that specialize in space exploration, launch services and satellite technology. The fund will focus mainly on public suppliers, clients and competitors of privately held SpaceX, and would likely hold SpaceX shares if the company ever goes public.

If launched, Beyond Earth will join a small but strong group of space-themed ETFs, all up roughly 40% or more this year.

Ground Control to Major Tom

The space industry remains largely government-funded, but opportunities for investors are expanding as commercialization accelerates. “The next decade is poised to be the most active in space since the Apollo program,” Janus Henderson said in a recent post, citing NASA’s Artemis II moon orbit mission next year and plans to replace the International Space Station starting in 2030. Growth drivers include satellite communications, defense technologies and manufacturing.

As for ETFs, performance has been stellar:

• ARK Space Exploration & Innovation ETF (ARKX) is up 46% year to date, trading at $28.50 per share, according to Morningstar data.
• Procure Space ETF (UFO), which has posted 47% gain this year, is trading at $34.40 per share.
• State Street SPDR S&P Kensho Final Frontiers ETF (ROKT) has surged 37% this year to roughly $77.50 per share.

Sitting in a Tin Can: Performance, however, isn’t everything, and the funds’ AUMs tell a different story. UFO holds about $150 million in assets, ROKT just $33 million, and ARKX, the largest, about $450 million. Despite its space label, ARKX’s top holdings include not only Rocket Lab but also Palantir, Amazon and Nvidia. “This is where it gets a little gray and fuzzy with thematic ETFs,” said Dan Sotiroff, senior research analyst at Morningstar. “They often hold companies performing well for reasons only tangentially related to the theme.”

He added that thematic ETFs tend to be speculative, more a bet on future sector growth than current fundamentals. “Over a long period — 10 or 15 years — only about 10% of thematic funds outperform a global market index,” Sotiroff said.