Vanguard crossed the $2 trillion mark in U.S.-listed ETF assets under management this week, aided by $23 billion of net inflows to start the year and positive year-to-date total returns for nearly all of its ETFs. But passing this key milestone is due to advisors and end clients buying and holding Vanguard ETFs for the long term. Vanguard is the second-largest ETF provider behind BlackRock, which manages $2.3 trillion.
Indeed, in the last three years, the issuer has pulled in approximately $690 billion of new money, more than BlackRock’s $450 billion. The two leading asset managers have helped to drive ETF adoption with an array of products and education. They are likely to be the two largest ETF firms over the next three years despite high competition. However, while BlackRock has further embraced thematic, ESG, and actively managed ETFs in recent years, pushing its total U.S. lineup to close to 400, Vanguard has largely stuck to more diversified investment styles and offers just 81 ETFs.
Core US equity ETFs like the Vanguard S&P 500 ETF (VOO) and the Vanguard Total Stock Market ETF (VTI) overwhelmingly led the way over the last three years with $97.2 billion and $96.9 billion of net inflows, but other products from the company have been in greater demand in 2023.
The Vanguard Value ETF (VTV) has gathered the most money with $3.5 billion, while two fixed income ETFs, the Vanguard Total Bond ETF (BND) and the Vanguard Total International Bond ETF (BNDX), are among the top five, with net inflows of $2.7 billion and $2.1 billion, respectively. VTI and VOO have pulled in $3.4 billion and $2.4 billion thus far in 2023.
VTV, which holds high stakes in energy, financials, and healthcare companies like Berkshire Hathaway, Exxon Mobil, JPMorgan, Johnson & Johnson, and United HealthGroup, was up just 1.1% to start the year, trailing the 6.3% and 5.8% total returns for VTI and VOO.
Part of the appeal of Vanguard’s ETFs has been their low fees. Investors own stakes in hundreds and often thousands of securities for a modest price. Indeed, the firm’s 15 largest ETFs all have net expense ratios of 0.10% or lower.
However, larger investors caring more about an ETF’s liquidity than just its fees are also turning to Vanguard ETFs. For example, BND traded 5.2 million shares on average over the past month, and with a median bid/ask spread of 0.01%.
Thus far in 2023, 12 of the issuer’s ETFs have gathered more than $1 billion, including low-risk funds like the Vanguard Short-Term Treasury ETF (VGSH) and higher-risk funds like the Vanguard FTSE Emerging Markets ETF (VWO).
Congratulations to Vanguard and its shareholders. Here’s to another $2 trillion in ETF assets before too long.
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