VWO has lower costs with an expense ratio of 0.2% compared with 0.67% for the iShares ETF. [Investors Buying Vanguard Emerging Market ETF]
“The indexes from FTSE and CRSP are well constructed, offer comprehensive coverage of their respective markets, and meet Vanguard’s ‘best practice’ standards for market benchmarks,” said Vanguard Chief Investment Officer Gus Sauter on the index transition. “Equally important, and with our clients’ best interests in mind, we negotiated licensing agreements for these benchmarks that we expect will enable us to deliver significant value to our index fund and ETF shareholders and lower expense ratios over time.”
The transitions will be staggered and are expected to occur collectively over a number of months, Vanguard said. No changes are planned for Vanguard U.S. stock index funds seeking to track Russell and Standard and Poor’s benchmarks, or the 11 Vanguard sector equity funds currently seeking to track MSCI benchmarks. The transition to the new benchmarks is not expected to result in capital gains distributions to the Vanguard funds’ shareholders, according to a press release.
“Are the indexes better? Maybe. Maybe not,” said Daniel Wiener, editor of The Independent Adviser for Vanguard Investors. “But what they are is cheaper—or at least the costs to license the indexes will be cheaper, and faced with its first real competitive threat from the likes of Charles Schwab, which recently cut its own index fund costs to below-Vanguard levels, Vanguard is raising the bar and lowering costs further—or at least it will once the transition is complete.” [Schwab Takes Lead in ETF Price War]