In the fiercely competitive ETF market, a historic breakthrough is happening, with Vanguard's VOO set to become the strongest contender.

As of last Friday's close, the asset size of Vanguard's S&P 500 ETF (VOO) reached $540.76 billion, successfully surpassing BlackRock's iShares Core S&P 500 ETF (IVV) at $540.66 billion, becoming the world's second largest ETF. At the beginning of 2022, VOO was behind IVV by $58 billion.

VOO becomes the world's second largest ETF, on track to claim the global number one spot.

Currently, VOO is only $50 billion behind the world's first ETF, and currently the largest ETF, SPDR S&P 500 ETF Trust (SPY). In January 2022, this gap was $182 billion. Analysts predict that VOO's inflow will hit a new high, potentially surpassing SPY soon, and becoming the world's largest ETF.

Morningstar's North American Passive Strategy Research Director, Bryan Armour, stated that VOO was launched ten years after IVV, and has been catching up since its launch in 2010. In most years thereafter, VOO has brought in more new funds than IVV, including every year for the past four years. He predicts:

"VOO is expected to become the world's largest ETF in 2025 or at the latest in 2026. VOO is poised to break the record for single-year fund inflows. So far this year, VOO's fund inflows have reached $85 billion."

In contrast, SPY has seen outflows of $5 billion, and the gap between the two has narrowed in 2024. If this trend continues, VOO will easily take the top spot in 2025.

With low fees and favored by investors, VOO's BUFF is full.

The expense ratio of SPY is 9 basis points, while both VOO and IVV funds charge 3 basis points in fees, mainly targeting retail investors and other long-term investors, benefiting from the expanding scale of the ETF market. According to data from the consulting firm ETFGI, ETF assets in the USA recently exceeded 10 trillion dollars, nearly double that of four years ago.

Last year, State Street Global Advisors attempted to counter with a 'low-price war', reducing the expenses of its long-held SPDR Portfolio S&P 500 ETF (SPLG) to 2 basis points, but so far, it has only accumulated 49 billion dollars.

From a cost perspective, Nate Geraci, President of the financial advisory firm The ETF Store, believes:

"It's only a matter of time before VOO and IVV catch up to SPY. Investors continue to pour money into S&P 500 index ETFs, closely watching the price tags."

In fact, as early as September, VOO briefly surpassed IVV for four days, but failed to maintain the lead. This time, analysts are confident that VOO will maintain its lead, attributing Armour's rise to investors' different views on the world's two largest asset management companies. He believes, "Vanguard's focus on low-cost market returns may be the reason investors choose VOO over IVV."

TMX VettaFi's Research Director Todd Rosenbluth believes, "The recent significant increase in retail investors' acceptance of ETFs has helped Vanguard gain market share, with many investors using Vanguard ETFs exclusively to build portfolios."

Analysis indicates that VOO's success demonstrates Vanguard's broader advantage in the ETF field, as well as a sign of Vanguard's rapid rise in the ETF sector. As of the end of September, its 315 billion dollars in ETF assets accounted for 74.7% of BlackRock's 422 billion dollars in assets, steadily rising from 51.9% in early 2018.

Analysts believe that with the continuous development of ETFs in the United States, VOO and IVV are both expected to benefit further. Rosenbluth said:

"iShares and Vanguard Group both offer low-cost, highly liquid ETFs to support asset allocation purposes. We expect the assets of both to continue to rise by 2025."