Several Vanguard exchange traded funds were among the fund flows leaders late last week in terms of net creation activity, and it seems clear to us that a significant equity model change occurred on an institutional level, or perhaps “swaps” from like or competing ETFs.
Vanguard Small Cap (NYSEArca: VB), $966 million in inflows, Vanguard Mid Cap (NYSEArca: VO), $548 million in inflows, Vanguard Value (NYSEArca: VTV), $475 million in inflows, Vanguard Small Cap Growth (NYSEArca: VBK), $468 million in inflows, Vanguard Growth (NYSEArca: VUG), $440 million in inflows, and Vanguard Small Cap Value (NYSEArca: VBR), $354 in inflows, all saw heavier trading volumes and in some cases the creation activity equated to more than 20-25% of shares outstanding in the funds at the time.
Vanguard has made no secret of its quest to compete in terms of price (expense ratios) with other ETF issuers that have been in the space longer, namely Blackrock’s iShares and State Street Global Advisors. [Vanguard Leading ETF Inflows in 2012]
In most cases, the Vanguard alternatives in given asset classes and/or market caps are generally the cheapest if not one of the cheapest in terms of net expense ratios. For example, VB currently carries an expense ratio of 16 basis points while popular competitor, iShares Russell 2000 (NYSEArca: IWM), charges 28 basis points.
However, Vanguard’s path to truly challenging the likes of iShares and SSGA for U.S. Equity ETF dominance does appear to only be in the early stages, as VB for instance, even after taking in about $1 billion last week in new assets, still only has total assets of $4 billion versus IWM’s $13 billion.
Vanguard Small Cap