IVV Beat VOO by 10 Basis Points Last Year and Securities Lending Is the Reason Most Investors Miss

Both funds track the S&P 500 and charge the same 0.03% expense ratio. Over the past year, IVV returned 32.22% versus VOO’s 32.12%, while over ten years VOO returned 318.99% versus IVV’s 318.56%. The difference is attributed to fund plumbing rather than index composition. VOO is an ETF share class of a Vanguard 500 Index Fund mutual fund, using pooled flows and in-kind redemptions to reduce embedded capital gains for taxable investors. IVV is a standalone ETF, emphasizing operational precision such as tight bid-ask spreads and securities lending revenue that can offset expenses. Dividend timing also differs, with IVV distributing earlier in each quarter, which can help in rising markets and hurt in selloffs.

"Both track the S&P 500. Both charge 0.03% in expenses. Yet over the past year, IVV returned 32.22% while VOO returned 32.12%. Over ten years, the gap flipped the other way: VOO at 318.99% versus IVV at 318.56%. Tiny gaps, but real, and they come from fund plumbing rather than index composition."

"VOO is structured as an ETF share class of the Vanguard 500 Index Fund mutual fund, a design Vanguard used for years under patent protection that expired in 2023. The implicit bet is that pooling ETF and mutual fund flows through the same portfolio lets in-kind redemptions wash out embedded capital gains for both wrappers, producing superior tax efficiency for long-term taxable holders."

"IVV, launched on May 15, 2000, is a standalone ETF. Its bet is on operational precision: tight bid-ask spreads, aggressive securities lending revenue from iShares' institutional book, and a clean in-kind creation/redemption mechanism unencumbered by mutual fund cash drag. When BlackRock lends out S&P 500 names to short sellers and rebates the income, that revenue can quietly offset the headline expense ratio."

"Look at dividend timing. IVV's 2025 distributions totaled $8.039881 per share, with ex-dates clustered mid-month (March 18, June 16, September 16, December 16). VOO's ex-dates fall later in each quarter (March 27, June 30, September 29, December 22 in 2025). A reinvested IVV dividend goes back to work nearly two weeks earlier each quarter. In rising markets, that compounds in IVV's favor. In selloffs, it works against it."

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