The S&P 500 ETF SPY is a Money Printing Machine

The S&P 500 $SPY ETF manages an astonishing $554 billion in assets under management. It has an expense ratio of 0.09%. This may seem low at first glance, but considering the sheer size of their assets under management, and the math I share below, you’ll quickly see how enormous this business is and why they can offer such low fees in the first place.

But first, let’s talk about how much it costs to run this ETF. The people you need to hire, operations, and data. At its core, when it comes to record keeping, reporting, analysis, and data management, the ETF likely costs around $50 million per year to run. And even that might be generous. Could a master operator run this ETF with a $30 million budget? I think so.

Now here’s where things get interesting: in total, the ETF generates $498.9 million in revenue from expenses each year. That’s the assets under management multiple by the expense ratio. Whoa! Nearly $500 million in revenue just for sitting back and watching the S&P 500 all — seriously.

With around $50 million in operational costs, it’s safe to assume they distribute a significant portion—perhaps $100 million—in bonuses across fields of teams. The remainder likely goes straight back to the business.

The profit margins at these levels are staggering.

The payouts are immense.

The S&P 500 ETF is owned by SPDR, which is in turn owned by S&P Global, which Warren Buffett is in turn the largest owner of. One could say Buffett has been on this since the start, getting a deep dive into fund flows and the data he needs to outperform his number one counterpart – can he outperform the market?

Now, back to the ETF business, even if I’m slightly off and the costs are closer to $100 million, it’s still some of the easiest money I’ve ever seen. We are talking about close to $400 million a year in management fees that go directly into their account for watching their computers all day and letting 500 stocks do all the work.

This is a fascinating thing. It’s also partly why I blog and write: these are the important details all investors should know. I have some important updates coming about this, which I’ll share here as I keep building.

Fact About The First ETF: The first ETF, SPDR S&P 500 ETF Trust ($SPY), was launched in 1993 and remains one of the largest and most traded ETFs in the world.

Written by Stefan Cheplick, a fintech builder and writer with experience at Stocktwits and TradingView. Background and published work.