The ETF fee war is morphing into an index war.

On Tuesday, Vanguard said it is swapping out of MSCI indices in several funds and ETFs, in favor of benchmarks managed by FTSE and the University of Chicago’s Center for Research in Security Prices (CRSP).

Vanguard said the move is “expected to result in considerable savings for the funds’ shareholders over time.”

It appears that Vanguard will pay lower fees to license the new FTSE and CRSP benchmarks, which will allow Vanguard to further reduce expense ratios in its ETFs. In other words, Vanguard should end up passing along the savings to ETF investors. [Vanguard Changing Indices for Several ETFs]

Vanguard’s announcement Tuesday comes after Charles Schwab recently announced ETF fee cuts that made broad-based Schwab funds the cheapest products on the market.

“If you undercut us today, be prepared to do it again tomorrow,” Tim Buckley, who takes over as Vanguard’s chief investment officer in January, told Reuters. “We won’t just lower costs on one or two funds, we will do it across the board.”

“Vanguard is citing the change as a way to keep expenses low. While the timing is likely coincidental to Schwab’s expense cuts announced in September, the move could help Vanguard grow its asset base as investors use the expense ratio in their decision making process,” Todd Rosenbluth, ETF analyst with S&P Capital IQ, said Tuesday.

Vanguard’s market share gains in ETFs this year have been helped by its low-cost structure, he added.

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