State Street Wins as Trump Accounts Default to SPDR Portfolio S&P 500 ETF

The Treasury Department has created investment accounts for nearly 70 million children under 18, establishing a new financial infrastructure that initially defaults to a State Street fund. The program, known as Trump Accounts, uses automatic enrollment to provide every eligible child with a valid Social Security number an account.

According to the Treasury, more than $4.5 billion has already been deposited into these accounts through government seed contributions, family money, and philanthropic gifts. However, the money does not remain in cash. At launch, the State Street SPDR Portfolio S&P 500 ETF (NYSE: SPYM) was designated as the exclusive default investment option. This means that before parents or guardians select an alternative, all contributions are directed into SPYM.

The Treasury selected four additional low-cost index funds for future selection, including the iShares Core S&P 500 ETF (NYSE: IVV), the Vanguard Morningstar Total Stock Market ETF (NYSE: VTI), the State Street SPDR Portfolio S&P 1500 Composite Stock Market ETF (NYSE: SPTM), and the iShares Core S&P Total U.S. Stock Market ETF (NYSE: ITOT). State Street’s investment-management arm notes that SPYM is the lowest-cost U.S.-listed S&P 500 ETF, carrying a 0.02% expense ratio.

The article highlights that while the immediate revenue from the 0.02% fee on the $4.5 billion already deposited is approximately $900,000 per year, the long-term potential lies in the duration of the investment. Contributions can continue until the child turns 18, at which point the account transitions into a traditional IRA.

The program has also attracted significant corporate participation, with more than 70 companies committing to making contributions for employees’ children. Additionally, the new rules allow certain corporate and philanthropic donors to contribute individual stocks directly to the accounts.

Because SPYM tracks the S&P 500, the capital flowing into these accounts ultimately supports the same mega-cap companies that dominate American equity indexes, including Nvidia Corp (NASDAQ: NVDA), Microsoft Corp (NASDAQ: MSFT), Apple Inc (NASDAQ: AAPL), and Amazon.com Inc (NASDAQ: AMZN).