Vanguard cuts expenses on six ETFs

Move will save investors about $15M a year, says firm

Mar 4, 2012 @ 12:01 am

By Jason Kephart

Cheap access to the emerging markets just got cheaper.

The Vanguard Group Inc. has cut the fees on the $54 billion Vanguard MSCI Emerging Markets ETF (VWO) to 0.2%, a 9% reduction.

The fund firm also reduced the fees on the Vanguard Total World Stock Index ETF (VT), the Vanguard FTSE All-World ex-U.S. ETF (VEU), the Vanguard FTSE All-World ex-U.S. Small Cap ETF (VSS), the Vanguard Total International Stock Index ETF (VXUS) and the Vanguard High Dividend Yield ETF (VYM).

NO FEE WAR

In total, the cuts should save investors around $15 million in expenses, said company spokesman John Woerth. The expense reductions were instituted because of the ETFs' asset growth, rather than as a deliberate attempt to engage in any kind of ETF “fee war,” he said.

Vanguard's emerging-markets ETF is the industry's third-biggest ETF by asset size, and it was the cheapest diversified emerging-markets ETF even before the fee cut. The $560 million Schwab Emerging Markets Equity ETF (SCHE) is the next-cheapest at 0.25%. But the fund's real competition — in terms of size, at least — is the $40 billion iShares MSCI Emerging Markets Index ETF (EEM). That fund charges 0.67%, or more than three times what Vanguard charges.

Of course, there's more to an ETF than just the expense ratio. Morningstar Inc. analyst Paul Justice said that when it comes to selecting the right fund, index tracking and liquidity are as important, if not more so, than the expense ratio.

He added that Vanguard's emerging-markets ETF has grown to its present size because it's been the leader in all three of those categories for the longest period of time.

jkephart@investmentnews.com

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