Vanguard's S&P 500 tracker VOO has become the first ETF to reach $1tn in assets, surpassing State Street's SPY after quadrupling in size since 2022. The milestone highlights the growing dominance of passive investing as investors seek exposure to soaring AI stocks through low-cost vehicles. VOO charges just 0.03% in fees, making it one of the cheapest ways to gain US equity exposure.

The fund's rapid growth reflects a decade-long shift from active to passive management, with global ETF assets growing from $6.4tn at the start of 2020 to $21.9tn in April. New "fast entry" rules reducing S&P 500 inclusion from 12 to 6 months will force passive funds to buy into upcoming massive listings like SpaceX and Anthropic. These changes could create billions in demand for new stocks as index providers adjust their methodologies.

Vanguard pioneered the "ETF-as-a-share-class" model, allowing VOO and its mutual fund counterpart to hold a combined $1.6tn, making it the world's second-largest investment fund. Analysts note that even small differences in expense ratios significantly drive allocation decisions, with VOO attracting over $60bn in flows year-to-date. BlackRock's IVV is considered the only potential ETF that could eventually overtake VOO, given BlackRock's larger model portfolio business.