The Vanguard S&P 500 ETF (VOO, Financial) is rapidly gaining traction, drawing nearly $18 billion in inflows in the early days of 2025, surpassing its closest competitor by more than five times. This momentum follows a record-breaking $116 billion annual inflow in 2024. VOO's assets have reached $626 billion, on the brink of surpassing the world's largest ETF, the SPDR S&P 500 ETF Trust (SPY), which holds $637 billion in assets.
VOO's success is attributed to two main factors: its extremely low expense ratio of 0.03%, significantly lower than SPY's 0.095%, and its stable customer base. Vanguard's core clientele consists of cost-conscious financial advisors and retail investors who tend to invest consistently with minimal redemptions.
Despite trailing in asset size, SPY remains popular among professional traders due to its high liquidity and narrow bid-ask spread. However, this advantage results in more frequent fund inflows and outflows. Since its inception in 2010, VOO has never experienced an annual net outflow, while SPY has seen five years of net outflows during the same period.
Additionally, BlackRock's iShares Core S&P 500 ETF (IVV) is a significant contender, with $610 billion in assets and nearly $87 billion in inflows in 2024. IVV's expense ratio matches VOO's at 0.03%. Experts predict that IVV could soon surpass SPY in asset size, as BlackRock might adopt a more aggressive pricing strategy to dominate the ETF market.
