Investors may not have noticed a subtle but significant trend in the U.S.-listed exchange-traded fund space. The Vanguard Group Inc.’s ETF assets have been creeping steadily higher, and with the gap between its total assets under management and BlackRock Inc.’s iShares business now at roughly $300 billion, it’s within striking distance in the issuer rankings.
Currently, iShares ETFs have nearly $2.1 trillion in AUM—a staggering amount. But Vanguard funds have roughly $1.8 trillion. The SPDR S&P 500 ETF Trust (SPY), the original U.S.-listed ETF, has about $343 billion. So basically, there’s less than a SPY separating iShares from Vanguard at this point. (Granted, that’s the largest ETF in existence.)
At the start of this year, iShares had nearly $2.5 trillion in AUM, while Vanguard was at almost $2.1 trillion. It’s pretty clear both issuers have taken some hits, largely due to asset class performance tanking across the board this year as inflows have remained fairly strong. Indeed, the overall ETF market has seen assets shrink by roughly $1 trillion since the start of the year.
But looking at inflows for individual issuers, Vanguard is blowing even iShares out of the water. At the end of May, BlackRock had pulled in more than $56 billion—the second largest amount of flows—while Vanguard had gained more than $87 billion year to date. That’s in line with an ongoing trend, as Vanguard added more than $326 billion in all of 2021 versus iShares’ gain of $209 billion.
The Gap Narrows
Stepping back to the end of 2020, BlackRock’s lineup pulled in a total of $121.3 billion versus Vanguard’s $200 billion. You have to look back to 2019 to see BlackRock outperform Vanguard in terms of flows; that was when it pulled in an annual total of $117.6 billion, while Vanguard pulled in $104 billion.
Vanguard has been narrowing the gap ever since.
Consider also that Vanguard has made those gains with only about 80 ETFs on its roster, while iShares is heading toward having 400 ETFs currently trading.
That’s largely because Vanguard sticks mainly to broad core asset classes, while iShares isn’t afraid to drill down into very specific strategies and themes, not to mention offering angles on individual regions and countries. And make no mistake: It’s the core asset classes that get the biggest inflows as a general rule of thumb in the ETF space. That alone gives Vanguard an edge.
But the second-largest issuer in the U.S. market has another advantage. When one takes a straight average of its expense ratios, the number works out to 9 basis points. The straight average for BlackRock is more than three times that. And cost is another factor driving flows.
BlackRock’s offering has topped the ETF leaderboards since before ETF.com started keeping track of that data a decade ago. At some point, it overtook State Street Global Advisors to become the largest issuer. We very well could see a similar changing of the guard in the next year or two, depending on how the current market turmoil works out.
Contact Heather Bell at [email protected]