Vanguard has trimmed fees on almost 90 funds across multiple asset classes in an historic cost-cutting extravaganza tipped to save investors US$350 million this year.
In a release last week the passive investment giant revealed price reductions of between 0.01 per cent and 0.06 per cent on 87 funds, representing almost a quarter of its entire product range.
The cuts cover both traditional unlisted and exchange-traded funds (ETFs) in a wide range of asset classes including fixed income, US shares, global equities and cash – albeit excluding the most popular Vanguard products such as the US S&P 500 index-trackers.
But fixed income funds figure account for about 40 per cent of the latest fee reductions in an asset class the manager has singled-out for closer attention including through lower-cost active options.
Greg Davis, Vanguard chief investment officer, said in the release that bonds were “poised to play a crucial role in investors’ portfolios”.
Davis said by keeping fees low, Vanguard would have an edge in the actively managed fixed income space.
Salim Ramji, the recently appointed Vanguard chief, said in a statement that the “estimated savings” of US$350 million this year amounts to “the largest expense cut in our history”.
“Since 1975, we’ve actually reduced our funds’ expense ratios more than 2,000 times,” Ramji said.
Many of the Vanguard funds are already priced under 0.1 per cent, implying reasonably large proportional effects from even a 1 basis point cut.
For example, the Vanguard Total World ETF saw an almost 14 per cent cost reduction as the fee shrank to 0.06 per cent from the previous 0.07 per cent.
The Total World ETF is available in a portfolio investment entity (PIE) format via the InvestNow Foundation Series, one of the few Vanguard products packaged in the tax-effective wrapper for the NZ retail market.
Vanguard also serves as the underlying manager for several NZX-owned Smart ETFs. However, many NZ retail investors have direct exposure to Vanguard funds on platforms.
The manager exited the institutional market in Australia and NZ in 2020 in a move that saw about A$160 billion rehomed.
With more than US$10 trillion under management Vanguard is the world’s second-largest fund manager behind the roughly US$11.5 trillion BlackRock.
Boasting just over US$3.1 trillion in ETF assets under management, Vanguard has been gaining ground on the BlackRock-owned iShares in the increasingly price-competitive market but still lags its almost US$3.3 trillion rival.
The ETF industry, in particular, has seen waves of cost-cutting over the last decade or so that saw Fidelity win the ‘race to the bottom’ with the launch of zero-fee products in 2018.
Globally, Vanguard – due to celebrate its 50th anniversary this May – offers about 430 funds with more than half domiciled in the US.