Vanguard’s flagship S&P 500 exchange-traded fund has become the first ETF in history to surpass $1 trillion in assets.
The milestone underscores the growing dominance of passive investing and its potential influence on a wave of massive stock market listings expected later this year.
The fund, known by its ticker VOO, crossed the milestone on Wednesday after quadrupling in size since 2022.
The achievement marks a significant shift in the ETF landscape, with VOO overtaking State Street’s SPY, another S&P 500 tracking fund, amid strong investor demand for broad exposure to US equities and the artificial intelligence-driven rally.
AI rally drives record ETF growth
The rapid expansion of VOO has been fueled by both rising equity markets and steady inflows from investors seeking low-cost access to some of the largest technology companies benefiting from the AI boom.
“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, in a Financial Times report.
“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.
VOO charges an annual fee of just 0.03%, matching BlackRock’s IVV, another major S&P 500 tracker.
By comparison, SPY charges 0.0945%, a difference that industry observers say has become increasingly important to investors.
The growth of VOO reflects a broader shift toward passive investing over the past decade, driven by low fees, strong market returns, and the continued struggle of many actively managed funds to outperform benchmark indices.
Globally, ETFs held $21.9 trillion in assets at the end of April, according to consultancy ETFGI, compared with $6.4 trillion at the start of 2020.
The industry has also recorded 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.”
Passive funds set to shape mega IPOs
The rise of large index-tracking funds is expected to play a major role in several high-profile public offerings anticipated this year.
SpaceX, Elon Musk’s rocket and AI company, is expected to come to market later this month after discussions around raising approximately $75 billion at a $1.75 trillion valuation.
AI developer Anthropic is also preparing for an IPO valued at more than $1 trillion, while OpenAI is reportedly planning to file for a public listing after recently achieving a valuation of $852 billion.
Changes under consideration by S&P Dow Jones Indices could further accelerate passive demand.
Proposed “fast entry” rules would reduce the waiting period for inclusion in the S&P 500 from 12 months to six months.
Rob Arnott, founder and chair of Research Affiliates, said he intends to participate in the SpaceX IPO despite concerns about valuation because of expected demand from passive investors.
“[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.”
Cost competition intensifies
VOO surpassed SPY in assets in February 2025 and has attracted more than $60 billion in inflows so far this year.
“The scale of flows into VOO in particular — over $60 billion 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.”
Vanguard’s ETF-as-a-share-class structure means VOO and its corresponding mutual fund now hold a combined $1.6 trillion, making it the world’s second-largest investment fund, according to Morningstar data.
Only Vanguard’s Total Stock Market fund, with $2.2 trillion across its ETF and mutual fund share classes, is larger.
Looking ahead, Todd Sohn, chief ETF strategist at Strategas Asset Management, said BlackRock’s IVV is the only ETF with the potential to challenge VOO’s dominance, largely because of BlackRock’s extensive model portfolio business.
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