Vanguard, the company behind the world's-biggest emerging
markets ETF, cut the price of that fund, VWO, by 10 percent
yesterday. It also slashed fees on five other ETFs, saying the cuts
reflected asset growth for the funds. All the ETFs were and remain
the cheapest in their respective classes.
While Vanguard officials are loath to describe the company's
low-cost strategy as part of a price war, many ETF industry sources
say that asset-gathering in the pure beta portion of the market
will be fought in large measure on price. The only other firms that
have shown the stomach to play the low-price game are Charles
Schwab and Scottrade unit FocusShares.
The Vanguard Emerging Markets ETF (NYSEArca:VWO) now costs 0.20
percent, compared with 0.22 percent previously. Coincidentally,
VWO's rival behemoth developing markets ETF, the iShares MSCI
Emerging Markets Index Fund (NYSEArca:EEM), dropped its expense
ratio by 2 basis points as well earlier this year --to 0.67 percent
from 0.69 percent previously.
"It relates to our at-cost corporate structure," John Woerth,
head of public relations at Valley Forge, Pa.-based Vanguard, said
in a telephone interview about the reason for expense-ratio
reductions. "Given the growth of our ETFs over the past year, we're
delivering additional cost savings," Woerth added.
Woerth said the aggregate savings on VWO amounted to $10 million
and to $15 million on all six of the ETFs. VWO had almost about
$54.6 billion in assets as of Feb. 28, according to data compiled
VWO's closest competitor in terms of price is the Schwab
Emerging Markets Equity ETF (NYSEArca:SCHE), which has an annual
expense ratio of 0.25 percent.
The change on VWO's expense ratio was effective Feb. 28, as were
the price cuts on three other ETFs. Those funds and their lowered
- Vanguard Total World Stock ETF (NYSEArca:VT), 0.22 percent
from 0.25 percent
- Vanguard FTSE All-World ex-US ETF (NYSEArca:VEU), 0.18
percent from 0.22 percent
- Vanguard FTSE All-World ex-US Small Cap ETF (NYSEArca:VSS),
0.28 percent from 0.33 percent
The final two fee cuts were effective Feb. 27 and are as
- Vanguard Total International Stock ETF (NYSEArca:VXUS), 0.18
percent from 0.20 percent
- Vanguard High Dividend Yield ETF (NYSEArca:VYM), 0.13 percent
from 0.18 percent.
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