Vanguard Is Closer Than Ever to Ending BlackRock’s ETF Reign

There was a time when early leaders in hot areas of financial services could count on maintaining their profit dominance with ease. But now the $7.8 trillion market in US exchange-traded funds (ETFs) is hurtling toward a new order, as BlackRock Inc.’s lead over runner-up Vanguard Group Inc. shrinks to a razor-thin margin.

It’s a turnaround two decades in the making: From its peak of about 60% in 2006, BlackRock has seen its share of the ETF market slip to 32.5%, the lowest since 2001. Although that’s still the highest among all US issuers, Vanguard—which has managed to increase ...