VOO, IVV Gain Ground on SPY in S 500 ETF Race

The race among the top S&P 500 ETFs is heating up, with Vanguard S&P 500 ETF (VOO) and the iShares Core S&P 500 ETF (IVV) likely to overtake long-time asset leader the SPDR S&P 500 ETF Trust (SPY) next year, according to an X post from Bloomberg ETF Senior Analyst Eric Balchunas.

VOO will likely rank first in AUM because it is growing at a faster rate than IVV, Balchunas added.

“My price $IVV and $VOO both pass $SPY at the same time, but $VOO eventually pulls back in the long run because it takes more money and has a tailwind of MF (mutual fund) migration that $IVV he doesn’t have it,” Balchunas wrote. .

The potential shift comes as investors pile into index-focused funds, part of a larger increase in demand for exchange-traded funds. A number of issuers have converted mutual funds into ETFs, which are more tax efficient and transparent.

“The (mutual fund) migration is moving from mutual funds to ETFs. For example, investors in Vanguard (500 Index Fund Admiral Shares) VFIAX can convert their mutual fund shares into VOO ETF shares at no cost,” said Kent Thune, etf.com research leader. “These conversions give Vanguard the edge in the AUM race.”

S&P 500 ETFs: Fierce Competition

A key factor driving the popularity of VOOs and IVVs is their lower expense ratios. Both charge just 0.03% annually, compared to SPY’s 0.09%.

Performance among ETFs is similar year-to-date, with all three returning just over 16%, according to etf.com data.

While SPY maintains the highest trading volume with a daily average of $24.3 billion, IVV and VOO are gaining ground. VOO’s average daily volume is $2.3 billion, surpassing IVV’s 1.9 billion.

In the past five days, VOO and SPY inflows reached $3.4 billion and $3.1 billion, respectively, while IVV attracted $1.4 billion.

This trend also extends to longer time periods. Year-to-date, VOO has attracted inflows of $63.9 billion, compared to IVV’s $45 billion, while SPY has seen outflows of $19.2 billion.

“VOO and IVV are gaining more assets from retail investors, while SPY is gaining more from institutional,” Thune said. “I see retail investors tracking the recent past performance of the S&P 500, driven by technology, while institutional investors are reducing their positions to capture gains and restructuring portfolios to reduce risk.”

SPY’s higher liquidity continues to make it a favorite among institutional investors and traders. However, the consistent inflows and lower fees of VOO and IVV are steadily eroding SPY’s market share.

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