We’re all aware of the $SPY ETF. The SPDR S&P 500 Trust ETF, also known as the SPY ETF, is one of the most popular funds to track the SP500 Index. It comprises 500 large- and mid-cap U.S. stocks. A committee selects these stocks based on market size, liquidity, and industry. It indicates the financial health and stability of the U.S. economy.
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You might not know that the lifespan of $SPY depends on the lifespan of 11 millennials. Set up in 1993, it was constructed as a trust – more specifically, a unit investment trust. A UIT is a security that is designed to purchase a fixed portfolio of assets. Thanks to the weird legal structure used to set up the trust, more than $380 billion AUM rests on the lifespan of these 11 millennials. Check out the SPY prospectus: https://www.ssga.com/us/en/institutional/etfs/resources/doc-viewer#spy&prospectus
“The Trust has a specified lifetime term. The Trust is scheduled to terminate on the first to occur of (a) Jan. 22, 2118, or (b) the date 20 years after the death of the last survivor of eleven persons named in the Trust Agreement, the oldest of whom was born in 1990 and the youngest of whom was born in 1993. Upon termination, the Trust may be liquidated and pro-rata Units of the assets of the Trust, net of certain fees and expenses, distributed to holders of Units.”
SPY Prospectus
But how does $SPY work?
It was set up to allow the issuer to create fund units that resembled shares. This is why we can buy and sell them on today’s markets. But due to it being set up this way, it needed a termination date. Most trusts are structure to expire in 25 years – which was Jan 2018. Obviously, it was amended to attach the fund to the lives of these millennials (babies at the time). So, by doing this, it extended the ETF’s life.
Right now, $SPY will cease in Jan 2118. Or 20 years “after the death of the last survivor of the eleven persons” — whichever occurs first. Eight of the 11 millennials have a family connection to the American Stock Exchange, which structured the first ETF and was bought by NYSE Euronext in 2008.
But fret not – the oldest of the SPY 11 isn’t 30 yet, so we’ve got a bit of time to sort out an alternative or to extend it somehow unless they have some sort of Hunger Games competition to see who is; the ultimate SPY KID!
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