A Vanguard executive reportedly says the asset manager could theoretically offer ETFs to investors in Europe with zero fees. However, investors shouldn’t hold their breath for no-cost ETFs.
Nick Blake, head of retail at Vanguard Investments, in an Ignites Europe report said revenues from securities lending alone are sufficient to make ETFs profitable.
The idea of free ETFs does sound farfetched.
In fact, Brendan Conway at Barron’s reports that a Vanguard spokesman has poured cold water on the idea. “Vanguard has no plans to offer a zero expense ETF,” the Vanguard spokesman told Barron’s. “All investment products have fixed management and operational expenses, and while some providers may choose to absorb or waive some costs in order to offer competitive expense ratios, Vanguard does not engage in this practice.”
Still, the Ignites Europe report published on the Financial Times website did have the ETF industry buzzing on Tuesday.
“I would like to think the cost of investing [in ETFs]could come down to zero,” Blake said in the report. “There will always be a fixed cost in there, but if [a firm’s asset]volume is big [enough], the total expense ratio can come right down.”
Speaking at a conference in London, the Vanguard executive said the company’s ETF fees can decline more due to the revenues physical ETFs can generate from securities lending.