SPY trailed the S&P 500 by 0.14 percentage points over the past year, more than triple the gap at cheaper rivals
SPY’s NAV returned 15.60% in the 12 months to Sept. 30, against 15.74% for the S&P 500. Competing ETFs IVV, VOO and SPYM, which charge a third or less of SPY’s 0.0945% fee, each came within 0.04 percentage points of the index.
Key takeaways
The State Street SPDR S&P 500 ETF Trust, 'ETF:SPY', trailed the S&P 500 by 0.14 percentage points in the 12 months ending Sept. 30. The problem: Three cheaper funds that track the same index, including State Street’s own SPYM, trailed it by 0.03 to 0.04 points.
SPY has higher fees compared to the other funds. At 0.0945% a year, it costs about three times what iShares and Vanguard charge for their S&P 500 ETFs. That explains part of the gap, but not all of it.
The rest of the gap may come down to how the fund is structured: Unlike the other funds mentioned, SPY is a unit investment trust, not a traditional exchange traded fund. According to its prospectus, the trust can not lend out the stocks in its portfolio to earn extra income. Many index funds lend the shares they hold, typically to brokers whose clients sell short, in exchange for collateral and a fee. That fee income can offset part of the fund’s expenses. SPY’s prospectus bars the trust from lending its portfolio securities.
Additionally, SPY does not immediately reinvest cash dividends it receives from portfolio companies. Instead, SPY's dividends are held in a non-interest-bearing account until each quarterly payout.
Taken together, these two factors may account for at least part of remainder of the gap. However, State Street has not formally attributed the shortfall to these factors.
How are unit investment trusts structured?
A unit investment trust, or UIT, is one of three basic types of fund the SEC recognizes. The other two are open-end funds and closed-end funds. Most ETFs are open-end funds, but an ETF can also be a UIT, and SPY is one of them.
A UIT has no board and no investment adviser. A trustee holds the stocks and follows a written trust agreement. SPY still works like other ETFs in daily use: large investors create and redeem units directly with the trust, and the units trade on NYSE Arca.
Few big ETFs still use the UIT structure. State Street lists SPY, MDY and DIA as UITs. Invesco converted QQQ to a standard open-end ETF on Dec. 22, 2025, and cut its fee to 0.18% from 0.20%.
As investors's experience with SPY last quarter shows, there is little or no advantage to them for ordinary investors.
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Frequently asked questions
Can the SPY trust lend the stocks it holds?
Under the prospectus dated January 26, 2026, the trust is not authorized to lend its portfolio securities or other assets.
Do dividends earn interest before SPY pays them out?
Dividends are credited to a non-interest-bearing account and held without interest until the trust distributes them.
How far did SPY's net asset value trail the S&P 500?
Over the year ended September 30, 2026, State Street reported a net-asset-value return of 15.60%, against 15.74% for the index.
How did State Street's cheaper S&P 500 fund compare over that year?
State Street reported a 15.70% net-asset-value return for the SPDR Portfolio S&P 500 ETF, a shortfall of 0.04 percentage points.
