Vanguard fires another shot in ETF fee war

JUL 29, 2012
By  JKEPHART
The Vanguard Group Inc. will be the first to tell you that it isn't in the midst of an ETF fee war, but its competitors must feel that way. Last Tuesday, Vanguard filed with the Securities and Exchange Commission to offer a short-term Treasury inflation-protected securities exchange-traded fund. It will track the Barclays U.S. Treasury Inflation-Protected Securities 0-5 Years Index, which also happens to be the underlying index for the $358 million iShares Barclays 0-5 Year TIPS Bond ETF (STIP). To no one's surprise, the Vanguard version will carry a much lower expense ratio of 0.1%; the iShares ETF has an expense ratio of 0.2%. Vanguard's low-cost approach to investing has been a home run with investors since the financial crisis. Over the five-year period through June 30, the firm's assets grew 40% to almost $1.7 trillion. Meanwhile, overall industry assets grew just 10%. Vanguard's dominance has been particularly vexing to BlackRock Inc.'s iShares segment, which has been losing market share for more than two years to Vanguard's ETFs. Since 2010, Vanguard's ETFs have had inflows of nearly $100 billion, while iShares, the largest ETF provider, with $482 billion in assets, has taken in $56.7 billion.

"A BIG ISSUE'

On BlackRock's second-quarter conference call this month, chief executive Laurence D. Fink acknowledged the struggles iShares is having in core U.S. equity products, which Vanguard considers its sweet spot. “Without going into much detail, we believe we have a plan to address it over the coming months. And it is a big issue, and I have to give a lot of credit to Vanguard — they are a trustworthy brand, and they have taken market share from BlackRock in the U.S. core type of equity products,” Mr. Fink said. A Vanguard spokesman declined to comment. [email protected] Twitter: @jasonkephart

Latest News

No succession plan? No worries. Just practice in place
No succession plan? No worries. Just practice in place

While industry statistics pointing to a succession crisis can cause alarm, advisor-owners should be free to consider a middle path between staying solo and catching the surging wave of M&A.

Research highlights growing need for personalized retirement solutions as investors age
Research highlights growing need for personalized retirement solutions as investors age

New joint research by T. Rowe Price, MIT, and Stanford University finds more diverse asset allocations among older participants.

Advisor moves: RIA Farther hails Q2 recruiting record, Raymond James nabs $300M team from Edward Jones
Advisor moves: RIA Farther hails Q2 recruiting record, Raymond James nabs $300M team from Edward Jones

With its asset pipeline bursting past $13 billion, Farther is looking to build more momentum with three new managing directors.

Insured Retirement Institute urges Labor Department to retain annuity safe harbor
Insured Retirement Institute urges Labor Department to retain annuity safe harbor

A Department of Labor proposal to scrap a regulatory provision under ERISA could create uncertainty for fiduciaries, the trade association argues.

LPL Financial sticking to its guns with retaining 90% of Commonwealth's financial advisors
LPL Financial sticking to its guns with retaining 90% of Commonwealth's financial advisors

"We continue to feel confident about our ability to capture 90%," LPL CEO Rich Steinmeier told analysts during the firm's 2nd quarter earnings call.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.