Vanguard has reduced the fees on 10 of its exchange-traded funds, according to regulatory filings on Tuesday.
The move is part of the overall price-cutting trend across the ETF industry, which entered new ground with Monday’s announcement that Social Finance Inc. has filed with the Securities and Exchange Commission for what would be the first zero-fee ETFs, at least for the first year of their existence.
Eight of the 10 affected Vanguard ETFs are international-focused products, and the fee reductions range from one to two basis points. Total assets under management for this group of funds is $176.7 billion:
• Vanguard FTSE Emerging Markets ETF (VWO) - from 14 to 12 bps
• Vanguard FTSE Europe ETF (VGK) - from 10 to 9 bps
• Vanguard FTSE Pacific ETF (VPL) - from 10 to 9 bps
• Vanguard FTSE All-World ex-US ETF (VEU) - from 11 to 9 bps
• Vanguard FTSE All-World ex-US Small-Cap ETF (VSS) - from 13 to 12 bps
• Vanguard High Dividend Yield ETF (VYM) – from 8 to 6 bps
• Vanguard Total World Stock ETF (VT) – from 10 to 9 bps
• Vanguard Tax-Exempt Bond ETF (VTEB) – from 9 to 8 bps
• Vanguard Total International Bond ETF (BNDX) – from 11 to 9 bps
• Vanguard Total International Stock ETF (VXUS) – from 11 to 9 bps
In addition to the ETFs, Vanguard has cut the expense ratios on 27 mutual fund share classes as part of its recent wave of regulatory filings.
Vanguard’s mutual funds and ETFs have one of six fiscal year-ends ranging from August through January. Within 60 days of a fiscal year-end those funds within a particular group file an annual report, and within 120 days of a fiscal year-end they file their prospectus, which is the expense ratio of record, says Vanguard spokesman Freddy Martino.
He notes that the aggregate cost savings returned to clients across the group of mutual funds and ETFs involved in the current fee reduction is $55 million. This is an estimated figure that’s the difference between prior and current expense ratios, multiplied by the average AUM based on daily average assets during the fiscal year.
The next big wave of ETF prospectuses will file in April. “That’s where you’ll see the total market funds and the U.S. funds," Martino says.
Perhaps that batch of filings could herald additional fee reductions.
According to Vanguard, positive fund flows into the company’s products create greater economies of scale that result in cost savings passed along to investors. And a good chunk of those fund flows have gravitated toward Vanguard’s passively managed ETFs.