Vanguard has always been a respectably-sized provider, thanks to its cohesive line of low-cost ETFs. But since March 2009, Vanguard’s assets under management have more than doubled from $43.3 billion to $103.7 billion – a 139% gain. It’s now the third-largest ETF provider.
But that isn’t all that’s happening with the provider:
- Vanguard’s emerging markets fund, Vanguard MSCI Emerging Market (NYSEArca: VWO), is even gaining serious ground on its direct competitor, the iShares MSCI Emerging Markets (NYSEArca: EEM). They’re now the fifth and fourth-largest ETFs in the industry, respectively. VWO is behind EEM by $12.2 billion, but considering that just one year ago last March VWO had $5.3 billion in assets, it’s not too outlandish to think that it may eventually surpass EEM.
- The provider got 48% of positive cash flow to ETFs industry-wide in the first quarter, and also led the industry in cash flows for the first quarter.
- The cash flow has stayed steady, with at least $1 billion in cash flow for each month over the last year.
- Volume has increased in Vanguard ETFs in dollar terms, and saw a 25% increase in volume in the first quarter from a year ago.
Martha Papariello, the head of Vanguard’s ETF business, says that naturally the provider is excited about what’s been happening in recent months. “We’re winning one firm and one financial advisor at a time. It’s an exciting story.”
Papariello credit’s Vanguard’s increasing popularity with the fact that they’re known for their indexing expertise, better tracking and lower expense ratios. Vanguard’s retired founder and CEO John Bogle invented the concept of index-tracking funds when he launched the Vanguard 500 Index Fund in 1975.
Will Vanguard expand its product line? Only in a strategic way, Papariello says. “We’re always keeping an eye out for opportunities. We’ll only bring products to market with enduring investment value.” In other words, don’t expect a niche fund anytime soon.
Active management in ETF form may not be in the cards for Vanguard, either, because most of their active managers wouldn’t want to disclose their holdings on a daily basis. Papariello also feels that actively managed ETFs may be challenged industry-wide because it takes so long to establish a track record that most investors will trust, which she says is generally three years. Vanguard will, of course, stick with its actively managed mutual funds. “We don’t have a problem with active management in general,” she says.
Vanguard is sticking to what it does best, and by doing so, the provider should continue to win over new customers and make waves in the ETF industry.
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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.