Bringing you live news and features since 2006 

Low cost passive investment products gain traction for unique US firm

RELATED TOPICS​

The UK’s Retail Distribution Review which shifted the adviser model from commission to fee based was one of the key drivers behind the 2012 launch of the Vanguard Group’s ETF range in London. 

Vanguard has been offering funds in the European markets for over 15 years but the move to the UK in 2009 came because Vanguard specialises in low cost passive investment products and, while it is a business that distributes through wealth managers and other intermediaries, it does not pay commission. 

Founded in the US in 1975, the firm has a unique structure. Tim Huver (pictured), senior Product Manager at Vanguard, explains that in terms of corporate structure, the firm is mutually owned by its fund shareholders, so any revenue is reinvested in the business and provided back to shareholders in terms of lower expense ratios.

“The benefit of investing in one of our funds is that we can build scale and our goal is to operate at cost so that the revenue goes back to the end shareholders” Huver says. 

Huver comments that one of the biggest dynamics at the moment is the idea of passively managed products at the expense of higher cost active products. “We are seeing increased flows” he says, citing the Investment Association’s figures which show that 23 per cent of retail net sales went to tracker funds last year, while in 2010 that figure was less than 7 per cent.

Along with flows into passively managed products, Huver also sees costs coming down across the industry. “Our asset weighted total expense ratio for ETFs is 10 basis points” Huver says. “Across the industry it is over 30 basis points, so there is room for the industry to come down.”

Vanguard keeps costs low across the range of products they offer and they do offer active funds – of the USD3 trillion they have under management, one third is in actively managed products. “We are happy with our progress in Europe as we continue to launch low cost products and see a great deal of adoption as a result” Huver says.

Latest News

ETF data consultant ETFGI reports that assets invested in the global ETF industry reached a new record of USD12.71 trillion..
Calastone has published an ETF white paper which examines several of the processes that take place across the lifecycle of..
Adapting product lines to fit into changing methodologies and meet shifting demand is essential to remaining relevant in the industry..
Investors urgently need greater access to diversified investment strategies aligned with the Paris Agreement on climate change if the world..

Related Articles

Taylor Krystkowiak, Themes ETFs
Themes ETFs opened its doors in December 2023, with an introductory suite of 11 ETFs – seven thematic and four...
Konrad Sippel, Solactive
At the end of March, financial index specialist, Solactive, published its 2024 annual report on future trends.  ...
Lorraine Sereyjol-Garros, BNP Paribas
Following changes to the French Monetary and Financial Code and of the French market authority AMF’s General Regulation, it is...
Ed Rosenberg, Texas Capital
Texas Capital Bank first opened its doors back in December 1998 and nowadays offers wealth-management services, as well as commercial,...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by