Vanguard, the issuer of mutual and exchange traded funds that recently topped $3 trillion in assets under management, is taking the ETF fee-cutting approach that helped the firm rapidly gain assets in the U.S. to Europe.
Pennsylvania-based Vanguard said it will cut fees on four of its Europe-listed ETFs, Chris Flood reported for the Financial Times Thursday. The fees on those ETFs have been pared to between seven and 29 basis points per year and the new expense ratios will go into effect on Sept. 1, according to the FT.
The fee reductions show Vanguard is being proactive in building market share in Europe, an ETF market that some market observers believe could benefit from increased competition. Europe’s ETF market already shares one thing in common with U.S.: Dominance by a small number of players. While BlackRock’s (NYSE: BLK) iShares, State Street’s (NYSE: STT) State Street Global Advisors and Vanguard hold the bulk of U.S. ETF assets, in Europe it is BlackRock, Deutsche Bank (NYSE: DB) and Societe Generale’s Lyxor unit. [Assets Growing in European ETF Market]
When Vanguard has previously reduced fees on U.S.-listed ETFs, the firm has often assured those reductions will not be the last, a tact the company is taking in Europe as well, the FT reported. The average fee on a U.S.-listed Vanguard ETF is about a third of the industry average.
There are more ETPs listed across Europe than there are in the U.S. As of the end of June, Europe was home to nearly 1,440 ETFs and almost 2,060 exchange traded products from 50 providers, according to ETFGI data. The total number of Europe-listed ETPs has more than quadrupled since 2007.
“In June investors invested almost all net new money into equity exposures with the US and emerging markets being the preferred allocations. The S&P 500 index ended up 7% at the end of Q2 2014, closing at an all-time high (1963) on June 20th. Internationally, developed markets gained 2% and emerging markets are up 4%. The positive equity market performance has helped to improve investor confidence during the first half of 2014.” according to Deborah Fuhr, Managing Partner at ETFGI.