Vanguard fund becomes first ETF to top $1tn in assets

Vanguard’s S&P 500 tracker has become the first exchange traded fund to reach $1tn in assets, in a sign of the weight of passive money that stands ready to buy into huge listings such as SpaceX and Anthropic expected this year.

The Vanguard ETF, known by its ticker VOO, passed the landmark on Wednesday having quadrupled in size since 2022. It has leapfrogged State Street’s rival SPY — another S&P 500 tracker — in the process, helped by a fast-rising market and strong inflows as investors look for exposure to soaring AI stocks.

“As investors chase the AI boom, ETFs have become an ultimate vehicle for US equity exposure,” said Todd Rosenbluth, head of research at TMX VettaFi.

“Vanguard’s VOO has been the massive winner here, simply because it’s the biggest and among the cheapest ways to ride that trend,” he added.

The fund’s rapid growth reflects the boom in passive investing over the past decade, due to the industry’s ultra-low fees, the large returns on offer by simply tracking the US blue-chip index and the underperformance of many actively managed funds.

Globally, ETFs — funds that trade on exchanges like stocks — held $21.9tn at the end of April, more than three times the $6.4tn they held at the start of 2020, according to consultancy ETFGI, following 83 consecutive months of net inflows.

“Gargantuan” fund-tracking ETFs have been created by a decade of “pretty much one-way flow out of active into passive” funds, said Mike Bell, head of market strategy at RBC. “It’s clearly contributing to the rise of these mammoth ETFs.”

The Vanguard vehicle charges fees of just 0.03 per cent, as does BlackRock’s $857bn IVV, another S&P tracker.

Tracker funds, which automatically buy an index’s constituents, are set to be major buyers of three huge listings expected this year.

Later this month Elon Musk’s rocket and AI firm SpaceX, which has discussed raising about $75bn at a $1.75tn valuation, will come to market, while Claude maker Anthropic is set for a more than $1tn IPO and ChatGPT firm OpenAI, recently valued at $852bn, is planning to file imminently.

New “fast entry” rules by index providers mean new stocks will enter Wall Street indices more quickly than under the previous rules, prompting billions of dollars of demand for the shares.

S&P Dow Jones Indices last week closed its consultation on changes that could fast-track stocks’ entry into the S&P 500. If accepted, the changes would reduce the period before inclusion from 12 months to six months.

Rob Arnott, founder and chair of Research Affiliates, said he plans to buy into the SpaceX IPO despite what he sees as an excessive valuation because of the billions of dollars of passive money that will have to purchase the stock after the listing.

“[Passive funds] are forced to buy not at the IPO price, but at a post-IPO price that may be inflated in anticipation of the inclusion,” he said. “The narrative is: buy the IPO price, no matter what, and sell [the stock] after the S&P adds it.”

VOO surpassed SPY, which has $788bn in assets, in February 2025. In contrast to VOO and IVV, SPY charges a fee of 0.0945 per cent.

“The scale of flows into VOO in particular — over $60bn year-to-date — highlights how sensitive investors are to costs, even at very low fee levels,” said Deborah Fuhr, managing partner of ETFGI. “Over time, even small differences in expense ratios are a powerful driver of asset allocation decisions, especially for institutional and model portfolio allocations.”

In 2023 State Street slashed the fee on its SPDR Portfolio S&P 500 ETF, which is cheaper but less liquid than SPY, to just 0.02 per cent, but so far it has amassed just $149bn.

Vanguard pioneered the “ETF-as-a-share-class” model that means an ETF and a mutual fund can operate as separate classes of an overall fund, and VOO and its sister mutual fund now hold $1.6tn between them.

It is now the second-largest investment fund in the world, according to Morningstar data, beaten only by the $2.2tn held in total by the ETF and mutual fund share classes of the Vanguard Total Stock Market fund.

Todd Sohn, chief ETF strategist at Strategas Asset Management, said he thinks IVV is the only ETF that has the potential to ever overtake VOO, largely due to BlackRock’s larger model portfolio business.