You can just about call VOO the Michael Jordan of the ETF industry.

The Vanguard S&P 500 ETF (VOO) is nearing $1 trillion in assets, a threshold no ETF has crossed. The fund, which gives investors exposure to 500 of the largest US companies with an expense ratio of just 3 basis points, became the largest ETF on the market last year when it surpassed the SPDR S&P 500 ETF Trust (SPY). It has since garnered a massive lead: VOO’s AUM is around $980.7 billion, while SPY sits closer to $775.1 billion, according to data from VettaFi as of Friday.

“VOO crossing the $1 trillion mark will be a tremendous milestone for the ETF industry,” said Todd Rosenbluth, head of research and editorial at TMX VettaFi. “The low-cost S&P 500 index ETF has become the starting point for many advisors and investors building asset allocation strategies.”

Baller Bet

ETFs have surged in popularity lately, thanks to their ability to give investors diversification and broad exposure at low costs in an easy-to-use wrapper. Vanguard’s fund exemplifies the benefits, with “VOO and chill” becoming a popular investment strategy for everyday investors. Reaching the $1 trillion mark is likely to encourage more investors to embrace the ETF structure, Rosenbluth says. And the milestone wouldn’t be a milestone only for VOO, but for the ETF industry as a whole:

• “It confirms the dominance of ETFs as investors’ preferred investment vehicle over mutual funds,” said Seth Hickle, chief investment officer at Mindset Wealth Management. “This milestone also shows the growing institutionalization of passive investing as investors pour money into broad-based market exposure rather than trying to pick individual winners.”
• VOO being so close to crossing that $1 trillion line also shows a lot of trust in Vanguard. It’s “a testament to their goal of providing transparent low-cost market exposure that is simple, efficient and easy to understand,” Hickle added.

Game Time: A pullback from the stock market, which is balancing momentum from strong corporate profits and interest in AI with worries about geopolitical tensions and inflation, could mean we have to wait a bit longer. But VOO’s $1 trillion slam dunk certainly is within reach.

They might sound like technology out of “Back to the Future,” but quantum computers are no flux capacitors.

The US Department of Commerce announced $2 billion in grants to nine quantum computing companies earlier this month, making the federal government a stakeholder in the sector’s commercial success. The move is similar to 2022’s CHIPS Act, which provided funding for the manufacture of semiconductors, a major current growth area in the world of AI-focused and new leveraged ETFs. But quantum computers may hold even more potential, since they could dramatically push forward the fields of AI, finance, healthcare and cybersecurity. It’s an investing theme that could help provide growth opportunities in client portfolios.

“We talk a lot about intelligence, whether AI is adding value and productivity,” said Chris Gannatti, global head of research at WisdomTree, which runs a quantum computing ETF. “Quantum computing is a natural extension [of] that.”

Quantum Leap

For the non-computer scientists among us, a quantum computer is, very basically, a machine that uses quantum physics to solve complex problems that current supercomputers either can’t solve or would take several million years to solve. Beyond the possibilities of quantum computing and the latest federal funding, however, there are also myriad IPOs that might enable more investment. Last week, the quantum computing firm Quantinuum filed for an IPO targeting a valuation of up to $12.7 billion. “People are hungry for new tech-oriented IPOs, and what’s great is instead of just having exposure to one or two public companies, now you’re able to have a more broadly diversified array,” Gannatti said. Still, there aren’t many funds targeting quantum computing specifically. “What you see a lot of today is mixing quantum computing with something else,” he added.

The two main funds available that focus entirely on quantum computing include:

• The WisdomTree Quantum Computing Fund (WQTM), which is up 50% this year.
• The Defiance Quantum ETF (QTUM) is up 43% over the same period.

Quantify It: Still, many other funds, such as the iShares US Technology ETF (IYW) and the State Street SPDR S&P Semiconductor ETF (XSD), provide major exposure to companies like Nvidia and Intel, which are heavily involved in the quantum computing industry. The sector tends to see inflows when there are specific advances or quantum-related announcements, Gannatti said. “It is wrapped up in this broader technology rally where memory and semiconductors and all sorts of things are also going up, in some cases even more than quantum,” he added. “We are seeing a broadly favorable tech hardware environment.”

No one can predict the spot price of crypto, but they can at least leverage it.

Exchange-traded fund providers are coming up with increasingly creative ways to give investors access to digital assets. The latest example comes from VanEck, which launched last week the first US-listed ETF designed to track BNB, the native asset of one of the world’s largest blockchain ecosystems. Direxion also announced two new ETFs leveraging exposure to bitcoin and Ethereum, as well as two others tracking gold and silver, assets that have all been used as inflation hedges. The move signals an increasing appetite for products that allow investors to leverage short-term bets on the market and comes at an interesting time for the asset class: More than $1 billion exited spot bitcoin ETFs in the last week alone.

“At this point, we’re seeing DeFi and TradFi increasingly coming together,” said Mo Sparks, chief product officer at Direxion.

Spot Plays

The Direxion funds bill themselves as the first to offer pure swap spot exposure, giving buyers 2x leverage on existing ETFs, specifically the largest funds in each of the asset categories. (The spot bitcoin fund, for example, invests in IBIT.) While none of the funds are holding the crypto or precious metals directly, the underlying ETFs are. “We’re wrapping and getting exposure at the 2x level via a swap from a bank to IBIT,” he said. “Others do something similar but include futures or are only futures [contracts].”

The research shows leveraged spot products may pick up from here:

• According to a recent Morningstar report, more than 300 funds that launched last year were trading-leveraged equity products, more than any other category the firm tracks.
• More than 90% of trading in single-stock, leveraged funds was done by individual investors, showing their allure within the retail market.

HODL On a Sec: The VanEck BNB ETF (VBNB) is the latest product in the company’s crypto suite, which includes the popular HODL fund. The issuer is hoping to tap into growing demand for BNB, which is one of the top 5 cryptocurrencies in the world by market cap and among the top 3 based on daily active users, according to a statement. “Until today, BNB stood out among major crypto assets as one of the few not yet available in a US spot ETP,” Kyle DaCruz, VanEck’s director of digital assets products, said in the release.