For example, Vanguard’s ETF market share has expanded 29% in just the last two years, accounting for 17.9% of the overall space at the expense of competitors like BlackRock, which has seen its market share drop to 40.6% from 46.6% over the same period, according to the report.
Vanguard’s low-cost model has not gone unnoticed as other companies are now beginning fight back with fee cuts of their own. BlackRock CEO Larry Fink previously announced the firm will cut fees on a number of ETFs to better compete. More recently, Charles Schwab cut expenses by as much as 59%, with one ETF down to a 0.04% expense ratio. [ETF Fee Cuts: Almost a ‘Free Lunch’]
Nevertheless, Vanguard will not sit idly by as the price war escalates. The firm is now swapping out underlying ETF indices in favor of low cost alternatives, which the firm says will trickle down as savings for investors. [Vanguard Benchmark Trade Shakes Up Index Industry]
“If you undercut us today, be prepared to do it again tomorrow,” Tim Buckley, the incoming CIO at Vanguard, said in the Reuters article. “We won’t just lower costs on one or two funds, we will do it across the board.”
Sounds like fighting words.
For more information on the ETF industry, visit our current affairs category.
Max Chen contributed to this article.