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

If you are choosing between Vanguard 500 Index Fund ETF (NYSEARCA:VOO | VOO Price Prediction) and iShares Core S&P 500 ETF (NYSEARCA:IVV), the index is the same. 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.

What Each Fund Is Actually Betting On

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.

Where the Difference Shows Up

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.

IVV’s Q4 2025 distribution of $2.413592 dwarfed VOO’s Q4 payout of $1.771, reflecting differences in how each sponsor passes through accrued income and securities lending revenue at year end.

The Practical Comparison

The Verdict

For a taxable account held at a non-Vanguard broker, IVV is the cleaner choice: earlier dividend reinvestment, tighter institutional spreads, and securities lending revenue that has produced a slight performance edge over the past five years (87.7% versus 87.62%). For an investor already custodied at Vanguard, or one holding inside a taxable account where the mutual fund share class structure historically suppressed capital gains distributions, VOO wins on after-tax math over a multi-decade horizon. What flips the calculus: if Vanguard’s post-patent tax mechanics begin generating gains distributions, IVV’s structural simplicity becomes the dominant edge.