Vanguard clients have saved a total of USD13 million as a result of lower expense ratios for 35 individual mutual fund shares, including 11 exchange-traded fund shares (ETFs).
These changes represent the first wave of Vanguard funds with a fiscal-year-end date in 2016 to report expense ratio changes (in this instance, funds with a fiscal year that ends in August).
Vanguard will announce any additional expense ratio changes as funds update their prospectuses in the coming months.
Expense ratios are reported on an annual basis and are based on actual operating expenses for the prior fiscal year.
“While some will portray Vanguard’s expense ratio reductions as another volley fired in the fee war, we view it as business as usual. We’ve been lowering the cost of investing for four decades and will continue to do so,” says Vanguard CEO Bill McNabb (pictured). “Importantly, we have announced reductions across our product offerings – mutual fund and ETF, index and active, stock and bond, domestic and international.”
Vanguard’s expense ratio reductions are in part a result of the continued growth of the funds via market appreciation, as well as strong cash inflows. The firm reported expense ratio reductions for the 12 months ended August 2016 for a range of fund share classes (Investor, Admiral, ETF, Institutional and Institutional Plus) in five fund categories:
Bond index – 24 Vanguard bond index fund shares reported lower expense ratios. For example, the USD18.7 billion Vanguard Short-Term Corporate Bond Index Fund reported the following reductions: Admiral Shares, 3 basis points to 0.07 per cent; ETF Shares, 3 basis points to 0.07 per cent; and Institutional Shares, 2 basis points to 0.05 per cent. A basis point is 100th of 1 per cent.
Size/style equity index – Four size/style index fund shares that seek to track CRSP benchmarks reported lower expense ratios. The largest of these funds, the USD2.3 billion Vanguard Mega Cap Growth Index Fund, reported that the expense ratios of its Institutional Shares and ETF Shares declined by 2 basis points, to 0.06 per cent and 0.07 per cent, respectively.
Social index – Two social index fund shares reported lower expense ratios. The USD2.4 billion Vanguard FTSE Social Index Fund reported that the expense ratio of its Investor Shares fell 3 basis points, to 0.22 per cent, while that of its Institutional Shares fell 3 basis points, to 0.12 per cent.
Actively managed domestic equity – Three actively managed domestic fund shares reported lower expense ratios. The largest of these funds, the USD6.6 billion Vanguard U.S. Growth Fund, reported that the expense ratios of its Investor and Admiral shares declined by 1 basis points to 0.46 per cent and 0.32 per cent, respectively.
Actively managed international equity – Two actively managed international fund shares reported a lower expense ratio. The USD21.5 billion Vanguard International Growth Fund, reported that the expense ratios of its Investor Shares and Admiral Shares declined by 1 basis point to 0.46 per cent and 0.33 per cent, respectively.
