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"Thanks to a quirk in the legal structure used to set up the SPDR S&P 500 ETF Trust, known as SPY, more than $250 billion rests on the longevity of 11 ordinary
by gota 7y ago
"Thanks to a quirk in the legal structure used to set up the SPDR S&P 500 ETF Trust, known as SPY, more than $250 billion rests on the longevity of 11 ordinary kids born between May 1990 and January 1993."
By law funds require a determines termination. They tied it to the death of "random" kids. The fund will end in 2118 or 20 years after the last of these
eleven kids (chosen, "voluntarily" by their parents, as token people) dies
It' relatively clear and straightforward, but the article does not explain what happens when the fund terminates.
- dhosek 7y agoThere's only one way to find out. And if these kids start dying mysterious deaths, we'll know that someone has decided to go that route.
- Overtonwindow 7y agoI was just thinking this would make a great plot of a spy novel. Since it began so long ago, I think Robert Litell would be perfect
- User23 7y agoI totally got a Robert Ludlum vibe.
- AndrewDucker 7y agoThat would be the result of a tontine. https://en.m.wikipedia.org/wiki/The_Wrong_Box?wprov=sfla1 https://en.m.wikipedia.org/wiki/The_Wrong_Box?wprov=sfla1
- scott00 7y agoIf you want to know, it's probably in the prospectus. I'd be shocked if termination called for anything other than liquidating the holdings of the trust and distributing the proceeds pro-rata to shareholders. Even if something weird was supposed to happen, there would be at least 20 years of notice for everyone to get their money out.
- astrange 7y agoSince it's an ETF, I'm pretty sure you can hand in your SPY shares to the trust and they'll give you the underlying S&P 500 companies' shares without even having to sell.
- nimish 7y agoOnly authorized participants can do that.
- webninja 7y agoETF shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, less wealthy investors must buy and sell ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may pay more than net asset value (NAV) when buying and receive less than net asset value when selling.
- BubRoss 7y agoWhy wouldn't they just send a fixed time? Why would anyone want to use random kids as their oracle?
- toast0 7y agoMost likely the relevant rule against perpetuities has a limit of X years or death of a named person + 20 years. And the X is known, but likely to be less than the longest life + 20 years.
- guan 7y agoThe traditional rule against perpetuities is the life of someone alive when the trust is created plus 21 years. That is also the rule in New York, in section 9-1.1 of the Estates, Powers and Trusts Law. SPY’s lawyers probably chose 20 years to be on the safe side.
- IloveHN84 7y agoFund terminates, bankers win