has gone from being known as being the low-price leader in the
exchange traded fund (
) industry to being known as something else: one of the
fastest-growing ETF providers around.
Vanguard has always been a respectably-sized provider, thanks to
its cohesive line of low-cost ETFs. But since March 2009,
Vanguard's assets under management have more than doubled from
$43.3 billion to $103.7 billion - a 139% gain. It's now the
third-largest ETF provider.
But that isn't all that's happening with the provider:
- Vanguard's emerging markets fund,
Vanguard MSCI Emerging Market (NYSEArca:
, is even gaining serious ground on its direct competitor, the
iShares MSCI Emerging Markets (NYSEArca:
. They're now the fifth and fourth-largest ETFs in the industry,
respectively. VWO is behind EEM by $12.2 billion, but considering
that just one year ago last March VWO had $5.3 billion in assets,
it's not too outlandish to think that it may eventually surpass
- The provider got 48% of positive cash flow to ETFs
industry-wide in the first quarter, and also led the industry in
cash flows for the first quarter.
- The cash flow has stayed steady, with at least $1 billion in
cash flow for each month over the last year.
- Volume has increased in Vanguard ETFs in dollar terms, and
saw a 25% increase in volume in the first quarter from a year
Martha Papariello, the head of Vanguard's ETF business, says
that naturally the provider is excited about what's been happening
in recent months. "We're winning one firm and one financial advisor
at a time. It's an exciting story."
Papariello credit's Vanguard's increasing popularity with the
fact that they're known for their indexing expertise, better
tracking and lower expense ratios. Vanguard's retired founder and
CEO John Bogle invented the concept of index-tracking funds when he
launched the Vanguard 500 Index Fund in 1975.
Will Vanguard expand its product line? Only in a strategic way,
Papariello says. "We're always keeping an eye out for
opportunities. We'll only bring products to market with enduring
investment value." In other words, don't expect a niche fund
Active management in ETF form may not be in the cards for
Vanguard, either, because most of their active managers wouldn't
want to disclose their holdings on a daily basis. Papariello also
feels that actively managed ETFs may be challenged industry-wide
because it takes so long to establish a track record that most
investors will trust, which she says is generally three years.
Vanguard will, of course, stick with its actively managed mutual
funds. "We don't have a problem with active management in general,"
Vanguard is sticking to what it does best, and by doing so, the
provider should continue to win over new customers and make waves
in the ETF industry.
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