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Vanguard, the world’s second largest asset manager, is cutting fees on nearly half of its bond exchange traded funds in Europe as part of a push into the fixed income market and as competition among the biggest fund providers heats up.
The US-based asset manager, which oversees more than $10.5tn globally, is reducing the charges on seven of its total 15 fixed income ETFs in Europe, in an attempt to attract more customers to its bond funds and win a greater market share.
The seven funds, which range from ETFs tracking UK gilts to emerging market government bonds, will have their ongoing charges cut by two basis points. Vanguard estimates the total saving for investors will amount to about $3.5mn annually.
The changes mean Vanguard’s average asset-weighted expense ratio across its European fixed income index and actively managed fund range will be 0.11 per cent.
The move comes as the largest global providers of ETFs along with Vanguard, including BlackRock and State Street, jostle for dominance.
Salim Ramji, chief executive of Vanguard, told the Financial Times in September last year that he was planning a fresh push into the bond market, citing “extraordinary” inefficiencies and opportunities.
He said that increasing the firm’s scale in fixed income was a priority, broadening the business beyond its core equity offering.
Jon Cleborne, head of Vanguard for Europe, said that “the bond market is now twice the size of the equity market, yet remains opaque and expensive. Investors deserve better.”
He added that the asset manager was planning to expand its fixed income product offering over the coming months.
Debbie Fuhr, founder of research firm ETFGI, said: “What we’re seeing is firms are trying to compete on fees because the majority of assets and flow are going into lowest cost products.
“There’s clearly a move to invest in lower costs products. As assets go up, you can afford to bring fees down.”
Earlier this year, Vanguard announced the “largest fee cut” in its history in the US, which it estimated would save investors more than $350mn in 2025. Charges on 168 share classes across 87 funds were reduced.
Last year, Vanguard overhauled fees on its UK investment site, with a new £4 monthly charge that left some DIY investors paying more and clients of its managed service paying less.
The changes were aimed at helping the company to cover the “rising cost” of servicing customers who choose their own investments, Vanguard said, while encouraging less experienced investors to have their money managed by the company.