The US ETF Fee War: Same Index, Three Prices
August 19, 2026 · 2 min read · by ETFWinner Research
Three of the largest funds in the world track the identical index at different costs. Understanding why explains how the whole industry prices itself.
It is genuinely strange that the three biggest S&P 500 funds charge different fees for delivering the same return. Nothing about the index differs. The explanation is a mix of history, structure and who each fund is actually built for.
The three funds
VOO and IVV both charge 0.03% and are built as modern, low-cost holdings. SPY charges 0.09% — triple that — and remains enormous anyway.
| Ticker | Fund | Expense | YTD | Yield | AUM |
|---|---|---|---|---|---|
| VOO | Vanguard S&P 500 ETF | 0.03% | 12.78% | 1.28% | $460B |
| IVV | iShares Core S&P 500 ETF | 0.03% | 16.20% | 1.32% | $450B |
| SPY | SPDR S&P 500 ETF Trust | 0.09% | 12.85% | 1.25% | $570B |
Why SPY stays expensive and stays huge
SPY was the first US ETF and is structured as a unit investment trust, an older format that cannot lend securities or reinvest dividends internally. Those constraints cost a little performance. What it has instead is unmatched trading liquidity and the deepest options market of any equity fund.
For an institution trading size or writing options, that liquidity is worth far more than a few basis points. For a monthly investor buying and holding, it is worth nothing at all — which is why the cheaper funds have grown so quickly.
The fee war has an endpoint
Fees on mainstream index funds have fallen close to zero, and there is not much room left. Providers now compete on adjacent things: securities-lending revenue returned to the fund, tighter tracking, tax efficiency and bundled brokerage benefits.
This is why chasing the last basis point stopped being the useful exercise. Once two funds are within a couple of basis points, tracking difference and trading spread matter more than the headline fee.
What to compare instead
- Tracking difference, not expense ratio — the actual gap between fund return and index return, which includes lending revenue and tax drag.
- Bid-ask spread at the time you trade, which is a real cost on every purchase.
- Fund domicile, if you are not a US taxpayer, since withholding tax can dwarf every fee discussed here.
ETFs mentioned in this guide
Vanguard S&P 500 ETF
iShares Core S&P 500 ETF
SPDR S&P 500 ETF Trust
Frequently asked questions
Why is SPY more expensive than VOO and IVV?
SPY is structured as an older unit investment trust that cannot lend securities or reinvest dividends internally, and it retains a premium because of its unmatched trading and options liquidity.
Is IVV or VOO better?
They charge the same and track the same index, so differences come down to tracking precision, brokerage integration and personal preference rather than cost.
Does a lower expense ratio always mean higher returns?
Not exactly. Tracking difference — which includes securities-lending revenue and tax drag — is the more complete measure of what a fund actually delivers versus its index.
Why do institutions still use SPY?
For liquidity. Large trades and options strategies benefit far more from SPY's depth than they lose to its higher expense ratio.