The Vanguard Group Inc. is tweaking its S&P 500 exchange-traded fund in a way that will make it more attractive to large investors and frequent traders.
The firm today said that the $11 billion Vanguard S&P 500 ETF (VOO) will undergo a 1-for-2 reverse split next month.
The split will put the ETF's share price, now about $77, more in line with the share prices of the $141 billion SPDR S&P 500 ETF (SPY) and the $44 billion iShares Core S&P 500 ETF (IVV), which both trade at about $170.
The higher share price will decrease the transaction costs of buying or selling the fund, which will benefit mostly large investors such as institutions, as well as investors who trade often.
“For all intents and purposes, many investors, whether they're intending to hold an ETF for the long or short term, favor ETFs with lower spreads. We expect all shareholders will benefit from this move,” said Emily White, a spokeswoman for Vanguard. “The goal here is to lower transaction costs for investors.”
Michael Rawson, an analyst at Morningstar Inc. said the move will benefit existing shareholders.
“By raising this threshold, it helps defray some of the costs to Vanguard of creating new shares,” he said. “The bottom line is, they have existing shareholders in mind.”
Vanguard's S&P 500 ETF has been the most popular such ETF so far this year.
It had just over $3 billion in net inflows through Sept. 10, narrowly edging out the iShares Core S&P 500's $2.9 billion in inflows, according to IndexUniverse LLC.