Vanguard ETFs Gather $40 Billion After Index Switch
July 11th, 2013 at 3:00pm by Tom Lydon
During the so-called fee war, Vanguard switched out the benchmark indices on a 22 of its exchange traded funds, and the decision seems to be paying off.
“If you take those 22 funds, $40 billion has been accumulated during the first half of 2013,” Vanguard Group Chief Executive William McNabb told Reuters. “We think people are accepting the change. It hasn’t been the drag that a lot of people predicted it would be.”
Moreover, McNabb pointed out that the new assets inflows after the benchmark switch accounted for a slightly higher percentage of cash inflows year-over-year. [What Vanguard Index Swap Means For Investors]
Vanguard, along with other ETF providers, have engaged in a fee war that has cut the expense ratios on a number of fund products. Currently, two broad equity ETFs from Charles Schwab have the lowest expense ratio at 0.04%. [Vanguard Benchmark Trade Shakes Up Index Industry]
As the fee war escalated, Vanguard decided to drop the benchmarks on a group of MSCI Indexed ETFs for FTSE and University of Chicago’s Center for Research in Security Prices (CRSP) indices last October in an attempt to lower costs, which could transfer on to investors.
The lower fees have helped Vanguard attract a growing number of ETF investors, and the provider now leads ETF sales so far this year. [Vanguard Leading ETF Sales in 2013: Report]
For instance, the Vanguard Total Stock Market (NYSEArca: VTI), which now tracks the CRSP index, has attracted $3.4 billion in new inflow year-to-date, according to IndexUniverse data. Also, the switch over to FTSE has helped the Vanguard FTSE Emerging Markets (NYSEArca: VWO) stem the outflow from emerging market assets – VWO lost $3.8 billion in assets so far this year, whereas iShares MSCI Emerging Markets (NYSEArca: EEM) experienced $8.5 billion in redemptions.
For more information on ETF indexing, visit our indexing category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.