By Suzanne McGee

Feb 18 (Reuters) - Vanguard Group's Standard & Poor's 500 ETF VOO.P is on the edge of finally seizing the title of the world's largest exchange-traded fund from rival State Street Global Advisors' product, the SPDR S&P 500 Trust SPY.P, according to data from FactSet, LSEG and other sources.

As of late Friday, the State Street fund was still clinging to the lead, with $633.1 billion in assets compared with $631.8 billion for the Vanguard ETF.

That gap, however, has been narrowing consistently in recent months. Final data for inflows into both ETFs will not be available until later on Tuesday or Wednesday morning, FactSet and others said.

Analysts at Citi Research tracking monthly flows into and out of exchange-traded funds reported earlier this month that SPY had $19.4 billion in outflows, accounting for 25.7% of all U.S. equity ETF outflows. Meanwhile, the Vanguard ETF raked in 12.9% of all inflows in January, for a total of $21.3 billion.

The SPDR ETF, launched in 1993, was the first U.S. exchange-traded fund. It has reigned as the largest U.S. stock ETF ever since and remains the first choice of hedge funds and traders who prize its liquidity and tight trading spreads.

But Vanguard's lower-fee challenger, launched in 2010, won admirers among financial advisors and retail investors interested in paring costs to the bone.

"SPY's transition from being primarily an investment tool to more of a trading vehicle has made flows more volatile," said Ryan Jackson, senior analyst of passive strategies at Morningstar.

The ETF industry has also undergone massive changes, with the three biggest firms in the U.S. industry - BlackRock BLK.N, Vanguard and State Street - coming under siege from relative newcomers.

"There is now more of a fight for market share," said Anna Paglia, who last year left her post as global head of ETFs at Invesco IVZ.N to join State Street as executive vice president and chief business officer.

"SPY does keep growing in size because it's still the most traded ETF in the world," Paglia told Reuters.

She added that flows into and out of SPY tend to be seasonal in nature and that outflows early in the year are "not unforeseen."

Moreover, Paglia said flows into a retail-focused S&P 500, the SPDR Portfolio S&P 500 ETF SPLG.P remain robust.

According to the recent Citi Research report, this ETF - a "mini" version of SPY launched in 2005 designed to appeal to retail investors and with fees of only 0.02% - was the fifth-largest ETF in terms of inflows for January, attracting $3.2 billion.

"We don't look at SPY in isolation," Paglia told Reuters. "We look at the ecosystem."

That does not alter the reality that Vanguard's ETF may have finally toppled its State Street rival, said Todd Rosenbluth, head of research at VettaFi.

"State Street remains a dominant player in the ETF universe, but these are two different products."

(Reporting by Suzanne McGeeEditing by Marguerita Choy)

((Suzanne.McGee@thomsonreuters.com; 917-285-4385;))