Vanguard Zeros in on BlackRock’s ETF Crown

January 23, 2023

This article is part of an ongoing series celebrating the 30th anniversary of the first ETF listed on U.S. exchanges. 

 

 

Read more from our 30th anniversary coverage:

‘SPDR Woman’ Helped Drive ETF Innovation

Jim Ross Looks Back Over SPY’s 30 Years

30 ETF Milestones Over 30 Years

ETF Industry’s Next 30 Years of Twists and Turns 

 

State Street Corp. may have launched the first exchange-traded fund in the U.S., but BlackRock’s iShares has dominated the industry for much of the past three decades. 

That reign may soon come to an end. 

The world’s largest ETF issuer had $2.18 trillion in U.S.-listed assets under management through its iShares offerings as of Dec. 31, while Vanguard had $1.87 trillion, according to ETF.com’s year-end League Table. The $317 billion that separates iShares and Vanguard is close to the narrowest on record. 

Initially a collaboration between Morgan Stanley and Barclays, iShares entered the ETF market with a bang in 1996, when it launched over a dozen international-focused ETFs. Sensing the massive opportunity in the industry, BlackRock scooped up iShares in 2009 for $13.5 billion—a bargain basement price for an issuer that now manages $2.3 trillion across 397 ETFs in the U.S. 

Inflows for Vanguard ETFs have outpaced those for iShares ETFs in each of the past three years. Prior to that, iShares’ inflows were routinely ahead of those of Vanguard. In 2022, the gap between BlackRock and the No. 2 ETF issuer continued to narrow. Vanguard pulled in more money than BlackRock for the third straight year: $192 billion versus $171 billion. 

 

($M) BlackRock Vanguard
2022 170,833 192,105
2021 208,799 325,714
2020 121,294 199,918
2019 117,579 104,083
2018 134,266 84,757
2017 203,034 139,398
2016 105,597 94,810
2015 105,248 75,655

 

Racing for the Crown  

The data suggests Vanguard is on track to steal the ETF asset crown from iShares sometime in the next few years—if current trends persist. Of course, BlackRock likely won’t give away the No. 1 position it’s held for over a decade without a fight, though it’s a wonder what the firm can do to stem the tide.  

Many of iShares’ top ETFs are dirt cheap and on par in terms of cost with comparable funds from Vanguard. It also has a much more comprehensive set of ETF offerings compared with Vanguard—397 versus 81.  

On the other hand, Vanguard’s investor-friendly reputation is arguably second to none, and that’s allowed it to gain ground on its rival even in categories where the two have very similar products.  

In August, the Vanguard Total Bond Market ETF (BND) became the largest U.S.-listed bond ETF, eclipsing the iShares Core U.S. Aggregate Bond ETF (AGG).  

Today, BND has nearly $88 billion in AUM, $1.5 billion more than AGG, even though they both have identical expense ratios (0.03%). 

Bottom Line  

For investors, competition between the two ETF giants is only a good thing. Fees will continue trending down, and iShares will probably launch a plethora of interesting products to keep the money flowing into its funds.  

With at least a few years to go before a potential regime change, the bottom line is this: Vanguard’s ascension to the No. 1 ETF issuer position is likely, but by no means guaranteed.  

 

Email Sumit Roy at[email protected]or follow him on Twitter@sumitroy2  

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