Index Switch
In a bid to cut ETF costs, Vanguard in October said it would adopt benchmarks from FTSE Group for six international stock index funds and benchmarks developed by the University of Chicago’s Center for Research in Security Prices for 16 U.S. equity and balanced funds.
The decision didn’t hurt the popularity of the firm’s ETFs, said Woerth. Vanguard attracted $10.2 billion in ETF deposits in January, and new money has increased in almost all of the company’s ETFs since the October announcement, he said.
One ETF that has been affected by the switch is the firm’s largest, the $62 billion Vanguard FTSE Emerging Markets ETF (VWO). Unlike the competing iShares MSCI Emerging Markets Index fund (EEM), the FTSE product does not track South Korean stocks.
Since Oct. 1, EEM, which includes Korea, won more than $12 billion in deposits compared to less than $500 million for VWO, according to data from San Francisco-based IndexUniverse. In the first nine months of 2012, the Vanguard ETF took in roughly seven times more money than the iShares fund.