In contrast, according to a recent research paper by Bogle, many workers who invest in actively managed funds are seeing returns diminished due to the costly fees – active managers charge about a 1.12% expense ratio for the average large-cap blended fund. Furthermore, Bogle points out that active funds pay a penalty for keeping a share of assets in low-yielding cash and estimates total costs could add up to 2.27% per year.
Bill McNabb, Vanguard’s current chairman and chief executive, also stridently disagrees with Bogle’s stance, arguing that ETFs are a great investment innovation that lowers the cost of investing for millions of investors, reports Chris Newlands for Financial Times.
Despite Bogle’s misgivings, the Vanguard Group is now the second-largest U.S. ETF provider, with $473.1 billion in ETF assets under management. Vanguard’s success as an ETF provider may be attributed to its cheap fees, with an average 0.13% expense ratio on its 67 ETF offerings.
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