"Low cost" sweeps everything, Vanguard "tops" ETF, on Tuesday VOO surpassed SPY
Vanguard's VOO ETF has surpassed State Street's SPY with an asset size of $631.8 billion, becoming the largest ETF in the world, ending SPY's 31-year dominance. The success of VOO is attributed to its low fee strategy (0.03%), which has attracted a large number of long-term investors. VOO has achieved a net inflow of $23 billion in the past 8 months, while SPY has faced a withdrawal of $16 billion, reflecting the growing popularity of ETFs among retail investors
Rate competition reshapes the industry landscape, and the U.S. ETF market welcomes a significant turning point—Vanguard's VOO surpasses State Street's SPY to become the world's largest ETF.
According to TMX VettaFi data, as of Tuesday morning, the asset size of Vanguard's flagship blue-chip ETF VOO reached $631.8 billion, surpassing State Street's SPY at $630.3 billion, ending the latter's 31-year reign as the ETF leader.
The rise of VOO is primarily attributed to its highly competitive low fee strategy. Reportedly, VOO's annual fee is only 0.03%, significantly lower than SPY's 0.0945%. This makes VOO an ideal choice for long-term investors, attracting a large amount of capital seeking stable long-term returns.
Secondly, while SPY attracts high-frequency traders due to its derivative liquidity advantage (with an average daily trading volume exceeding $30 billion), VOO has become the preferred choice for pensions and individual retirement accounts with its "buy and hold" strategy.
ETF Store President Nate Geraci pointed out:
“VOO's extremely low fees, combined with Vanguard investors' 'buy and hold' mentality, create a combination that is hard to beat—especially in the past 15 years, where the S&P 500 has outperformed almost all other asset classes.”
In recent years, VOO's expansion speed has also been remarkable. Bryan Armour, Director of North American Passive Strategies Research at Morningstar, noted that at the beginning of 2022, VOO's size lagged behind SPY by about $182 billion, and even when it surpassed BlackRock's IVV last November, there was still a $50 billion gap. However, in the past 8 months, it has achieved a stunning turnaround—in 2024, VOO saw a net inflow of $23 billion, while SPY faced a $16 billion outflow.
VOO's success also reflects the increasing popularity of ETFs among retail investors. Compared to SPY, which is more favored by institutional investors, VOO attracts a large number of individual investors due to its low fees and simplicity.
Morningstar Senior Product Manager Syl Flood pointed out:
“VOO is a very cheap and practical tool. It is mainly used by long-term investors, while SPY is more like a trading tool. The fund stickiness of Vanguard's funds is almost stronger than any other fund.”
Intensifying market competition, Vanguard's advantages are evident
Currently, the global ETF size has surpassed $10 trillion, but the head effect is intensifying.
UBS data shows that by the end of 2023, the U.S. stock market's share of global market capitalization rose to 60.5%, a new high since 1973. The three major S&P 500 ETFs (VOO, SPY, IVV) collectively manage $1.5 trillion, accounting for 15% of the total global ETF size BlackRock and Vanguard together control 78% of the S&P 500 ETF market, with industry concentration continuing to rise.
Among them, Vanguard is rapidly closing in on BlackRock. According to Morningstar data, by the end of 2023, the size of Vanguard's ETFs reached $3.2 trillion, equivalent to 76% of BlackRock's $4.3 trillion, a significant increase from 52% at the beginning of 2018. This is driven by an annual shift of over $300 billion from active funds to passive products.
In addition, as the only asset management company to have received approval from the U.S. Securities and Exchange Commission (SEC) to operate the "ETF as a share class" model, Vanguard's ETFs and mutual funds can operate as different classes of an overall fund, and "allow mutual fund shareholders to convert to VOO," giving it a first-mover advantage in its operational model.
To curb the loss of market share, State Street reduced the fee for its SPLG to 0.02% (lower than VOO) in 2023, but its size is only $58 billion. Armour analysis states:
"A 1 basis point fee difference is hard to offset the conversion costs, and Vanguard's distribution network covers 85% of advisory firms in the U.S., making this ecological barrier difficult to breach in the short term."
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