Vanguard launches new funds in the U.K
When investors think of Vanguard, they think of index funds. But the $3 trillion mutual fund giant oversees more than just low-cost passively managed benchmark funds linked to the S&P 500 and other indexes.
When investors think of Vanguard, they think of index funds.
But the $3 trillion mutual fund giant oversees more than just low-cost passively managed benchmark funds linked to the S&P 500 and other indexes.
New Vanguard fund launches in the U.K. on Wednesday highlight how the low-cost king of mutual fund investing is expanding its footprint overseas - continuing to extend its low-fee brand to active management as well, in what may be a test-run at product launches back home.
Currently, out of its total $3.2 trillion in assets, $2.2 trillion that Vanguard manages for investors is in index funds. About $1 trillion is invested in actively managed funds, according to Jeff DeMaso of Vanguard Advisors newsletter in Brooklyn.
That means investors today place roughly one out of every three dollars at Vanguard in actively managed mutual funds.
This week in the U.K., Vanguard debuted the Vanguard Global Balanced fund, the Vanguard Global Equity fund, and Vanguard Global Equity Income fund, each with an annual fee of 0.60 percent; and the Vanguard Global Emerging Markets fund with a fee of 0.80 percent.
As Vanguard launches more active funds, fees are likely to come down for those, as well, DeMaso added.
"We know with some certainty when Vanguard enters an investment space, expense ratios come down," DeMaso said.
Vanguard last fall also launched four actively managed ETFs in U.K., as well, he noted.
"Does this foreshadow active ETFs from Vanguard here in the U.S.? While Vanguard hasn't said anything, I suspect that we will see Vanguard go down that road sooner rather than later. But they have to see what kind of reception they get in the smaller U.K. market first."
"That's a win for investors any way you cut it. It's probably only a matter of time until we see similar Vanguard products, and similar fee cuts here in the U.S."
The ETFs Vanguard launched are run by Vanguard's Quantitative Equity Group. All of those new ETFs sport an expense ratio of 0.22 percent. In comparison, PowerShares FTSE RAFI US 100 ETF charges 0.39 percent.
The four active funds introduced in the U.K. this week, spokeswoman Emily Farrell confirmed, "are an expansion of a range of index and active funds Vanguard offers in Europe," adding that the funds are advised by three external firms that also managed a number of U.S. active funds.
The fund managers are firms with which Vanguard has existing relationships. Baillie Gifford, for example, advises U.S. funds such as Vanguard International Growth.
"Vanguard trying to expand their footprint beyond the U.S., and it's a misconception that it's just in index funds. Vanguard has long offered low-cost actively managed funds, and they're now applying that formula overseas, as well," DeMaso said.
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