iShares IVV beats SPY on fee and assets, now larger fund

The iShares Core S&P 500 ETF (IVV) has overtaken the SPDR S&P 500 ETF (SPY) in assets, managing about $833 billion versus SPY’s $784.56 billion, while charging roughly one‑third the expense ratio 0.03% vs 0.0945% [1][3].

Fee gap and compounding impact

SPY’s expense ratio of 0.0945% translates to about $65 more in annual costs per $100,000 invested than IVV’s 0.03% fee [1][3]. Over decades, that difference compounds, eroding returns that could otherwise stay invested. The fee advantage also aligns with IVV’s open‑end structure, which can reinvest dividends and lend securities—features SPY’s unit‑investment‑trust format cannot use [3].

Performance and yield edge

Over the past year IVV outperformed SPY by 1.43 percentage points (20.28% vs 18.85%) and delivered a higher five‑year total return (82.42% vs 69.89%) [1][3]. The yield gap, though modest, favors IVV at 1.09% versus SPY’s 1.02%, reflecting the more flexible fund structure [3]. These differences are consistent with the lower fee and structural advantages rather than any fundamental divergence in holdings, as both funds track the same 500 S&P 500 constituents with near‑identical weights [3].

Market implications

For long‑term investors, the fee and yield advantages make IVV a more cost‑effective vehicle for core S&P 500 exposure, especially in tax‑advantaged accounts where a switch incurs no immediate tax cost [1][3]. Active traders and options market participants may still prefer SPY for its deeper options liquidity and tighter bid‑ask spreads, but the bulk of retail and institutional buy‑and‑hold money appears to be gravitating toward IVV’s lower‑cost structure.

What to watch

• ETF inflows: Weekly net inflow data for IVV and SPY could signal whether the asset‑size shift continues.
• Expense‑ratio trends: Any fee adjustments by either provider would directly affect the cost advantage.
• Options volume: Changes in SPY’s options open interest may indicate whether traders are maintaining a liquidity preference despite the fee gap.

The growing dominance of IVV underscores how fee differentials and fund structure can reshape investor allocations over time, even when the underlying index exposure is identical. The key question now is whether SPY can retain its liquidity premium enough to justify its higher cost for a broader set of investors.