Fees Resonate
Vanguard said it would cut the fee on three of its most popular products earlier this month, just days after trimming the cost of another 10 funds. Its S&P 500-focused ETF is now the cheapest in the U.S., while a bond fund is the lowest-cost fixed-income strategy.
Cost cutting seems to resonate with investors. A record 97 percent of net flows into passive funds in 2018 went to products that charged $2 or less for every $1,000 invested. That’s prompted some issuers to waive fees altogether this year.
But generating revenue from increasingly cheap ETFs has become a growing challenge. Both BlackRock and Vanguard have in recent years unveiled new funds focused on environmental, social and governance criteria, as well as factors -- products that typically charge higher fees.
The appetite for lower costs could ultimately boost Vanguard even more going forward. Driven in part by its willingness to slash fees, Vanguard is likely to surpass BlackRock as the world’s largest asset manager within 10 years, or sooner in the case of a dramatic stock market rout, according to Bloomberg Intelligence analyst Eric Balchunas.
This article was provided by Bloomberg News.