Vanguard, the largest U.S. mutual fund provider, has reduced the
annual expense ratios on 22 ETFs. The fee cuts will affect 10
industry sector funds, eight bond funds, and four broad equity
Fee reductions have been a boon to ETF investors and Vanguard's
move is largely due to structural changes within the ETF industry
as fund companies battle for assets by reducing management
) cut costs on its lineup of 15 ETFs to as low as 0.04%. BlackRock
) followed with similar fee ctus on its iShares ETFs.
In October, Vanguard announced plans to abandon MSCI indexes in
favor of alternative benchmarks for 22 of its largest index mutual
funds and ETF shares. The move is a cost cutting effort to minimize
the expenses of index licensing fees.
Sector funds like the Vanguard Industrials (NYSEARCA:VIS),
Vanguard Information Technology (NYSEARCA:VGT), and the Vanguard
Utilities (NYSEARCA:VPU) now charge 0.14% annually compared to
Expense ratios may fluctuate from year to year based on changes
in the cost of managing the funds. For example, economies of scale
resulting from an increase in a fund's total assets due to market
appreciation or cash flow can help reduce its expense ratio, while
a decline in assets can cause the expense ratio to rise.
All of the Vanguard ETFs listed in the table below have fiscal
years ending in August and reflect Vanguard's filings with the SEC
as of December 27, 2012.
Other ETF News
The ProShares Merger ETF (BATS:MRGR), a fund that follows a merger
arbitrage strategy, was launched on Dec.13.
Merger arbitrage strategies aim to capture the spread between a
target company's stock price after a proposed merger or acquisition
is announced and the deal price that the acquiring company will pay
for the target company.
"The goal of MRGR is to produce consistent, positive returns
under virtually any market conditions," said Michael L. Sapir,
Chairman and CEO of ProShare Advisors LLC, ProShares' investment
MRGR provides exposure to up to 40 publicly announced mergers or
acquisitions within developed market countriesthrough a combination
of long and, in certain cases, short security positions. When deals
enter the Index, the weight in long positions of target companies
is initiated at three percent (3%) and the initial weight in short
positions of the acquiring company ranges between zero and three
percent (0% and 3%), depending on terms of the deal
MRGR charges 0.75% annually and is linked to the S&P Merger
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