The Vanguard Information Technology ETF currently holds about $33.8 billion in assets under management, compared to the $32.7 billion in the Technology Select Sector SPDR Fund.
VGT may have overthrown XLK as the largest tech-related ETF by assets in mid-May, MarketWatch reports.
The rise of Vanguard ETFs reflects the growing demand for cheap, index-based fund strategies as more investors become acquainted with ETFs and the benefits of limiting costs in long-term investing, especially as more become disillusioned with the high costs and underperformance of active management.
Vanguard ETFs in particular have been a popular pick this year as more investors gravitate toward this fund provider’s cheap openings – VGT comes with a 0.1% expense ratio compared to XLK’s 0.13% expense ratio.
Year-to-date, the Vanguard Information Technology ETF attracted $3.4 billion in net inflows while the Technology Select Sector SPDR Fund added $1.9 billion, according to ETFdb data.
State Street Global Advisors’ Sector SPDRs, which includes the Technology Select Sector SPDR Fund, were among the first ETFs to track the S&P 500 sectors and remain popular plays to gain quick and easy access to S&P 500 sector movements because their scale allows institutional-size investors to efficiently execute big block orders without making too many waves.
Todd Rosenbluth, head of ETF and mutual fund research for CFRA, argued that if Vanguard’s assets are outpacing State Street’s it may reflect one of two outcomes: Either institutional investors are becoming more comfortable with Vanguard to rely on their ETFs as a trading tool, or individual investors, who have traditionally made up most of Vanguard’s customer base, are becoming more “tactical” with ETF strategies as they make targeted plays in the market.
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