Nearly a decade after the first ETF did it, another exchange-traded fund is about to hit a key milestone. The iShares Core S&P 500 ETF (IVV) is fast approaching the $100 billion in assets under management (AUM) mark, a level first reached by the world's largest ETF, the SPDR S&P 500 (SPY), in December 2007.
Since the $232 billion SPY did it more than nine years ago, no exchange-traded fund has become successful enough to challenge $100 billion. But the nearly 17-year-old IVV, with a current AUM of $96.4 billion, looks poised to repeat that impressive feat.
IVV's ascent has been surprisingly rapid. A year ago, the fund had only $65 billion in assets; five years ago, it had $28 billion. Part of it has to do with expenses. After price cuts in October, IVV is now the cheapest ETF offering exposure to the S&P 500, with a mere 0.04% expense ratio—less than half the expense ratio of SPY and even a hair lower than the expense ratio of the Vanguard S&P 500 Index Fund (VOO) (0.05%).
Of course, the surge in IVV's underlying index, the venerable S&P 500, has also helped bolster assets for the fund. In the past 12 months, the index is up 22%, while for the past five years, it's up 73%. The S&P 500 has been the go-to index for investors wanting exposure to the U.S. stock market through ETFs.
In fact, three of the top five largest U.S.-listed ETFs are S&P 500 funds. They've all seen their assets climb swiftly in the past year, though not quite at the rate of IVV.
Top Mutual Funds Still Dominate
Even after IVV surpasses $100 billion in AUM, it will be some time before ETFs can match mutual funds when it comes to the number of 12-figure giants. Currently, there are 18 mutual funds with assets of $100 billion or more. Moreover, there are four mutual funds―all of them from Vanguard―with assets of $200 billion or more, including the largest, the $446 billion Vanguard Total Stock Market Index Fund (VTSMX).
In the ETF world, SPY is the largest fund, with $232 billion in assets. That's followed by IVV at $96.6 billion, the Vanguard Total Stock Market Index Fund (VTI) at $75 billion, the iShares MSCI EAFE ETF (EFA) at $63.6 billion and the Vanguard S&P 500 Index Fund (VOO) at $62.2 billion. After that, there are four funds with assets between $40 billion and $50 billion.
Latest Highlight For ETF Industry
To be sure, IVV's "$100 billion" is nothing more than an interesting anecdote that won't mean anything to most investors. But it's the latest highlight for a booming ETF industry that, according to most experts, will inevitably supplant mutual funds as the dominant investment vehicle. ETF.com CEO Dave Nadig and InsideETFs CEO Matt Hougan have consistently called for total ETF assets to surpass mutual fund assets by 2025.
It's likely that, by that time, there will be plenty more ETFs joining IVV and SPY atop the ETF leader board with more than $100 billion in assets.
10 Largest ETFs
|Ticker||Fund||Expense Ratio||AUM ($B)|
|SPY||SPDR S&P 500 ETF Trust||0.09%||$232.09|
|IVV||iShares Core S&P 500 ETF||0.04%||$96.58|
|VTI||Vanguard Total Stock Market Index Fund||0.05%||$75.04|
|EFA||iShares MSCI EAFE ETF||0.33%||$63.64|
|VOO||Vanguard S&P 500 Index Fund||0.05%||$62.20|
|VWO||Vanguard FTSE Emerging Markets ETF||0.15%||$49.71|
|VEA||Vanguard FTSE Developed Markets ETF||0.09%||$44.25|
|QQQ||PowerShares QQQ Trust||0.20%||$43.64|
|AGG||iShares Core U.S. Aggregate Bond ETF||0.05%||$42.19|
|IJH||iShares Core S&P Mid-Cap ETF||0.07%||$38.64|
Source: ETF.com Screener & Database, powered by FactSet
Contact Sumit Roy at [email protected].