Vanguard cuts fees on dozens of passive funds

The cut is part of an ongoing race among index fund and ETF providers to offer investors the lowest fees possible. 

Funds and Investment Trusts October 23, 2019 by Tom Bailey

The race to the bottom in passive fund investment fees continues, with Vanguard announcing a new round of fee cuts to its funds.

In total, 13 ETFs and 22 index tracking funds have seen their fees slashed. Vanguard’s actively managed Sterling Short-Term Money Market fund will see its fees reduced from 0.15% to 0.12%.

As the table below shows, several ETFs and index funds now charge fees below 10 basis points. The cheapest on the list of those cut, the FTSE UK All Share Index fund, now charges just 0.06%. Investors can also purchase Vanguard’s UK Gilts UCITS ETF for just 0.07%.

Some of the biggest fee cuts were to Vanguard’s “socially responsible investing” index funds. Both the SRI European Stock Fund and SRI Global Stock Fund have seen their fee slashed by over 40%.

Several bond funds have also seen heavy fee cuts. Both the US Investment Grade Credit Index Fund and Euro Investment Grade Bond Index Fund have seen their fees goes from 0.30% to just 0.12%, a reduction of more than 60%.

The cut follows a decision in June to reduce the fees on its actively managed funds. The management fee for Vanguard Global Equity, Vanguard Global Equity Income and Vanguard Global Balanced Fund was dropped from 0.6% to 0.48%. 

Vanguard’s full list of funds (both active and passive) available to UK investors now have an average fee of just 0.20%. The company’s index funds now have an average fee of 0.15% and ETFs an average of 0.10%.

The cut is part of an ongoing race among index fund and ETF providers to offer investors products with the lowest possible fees. In the US, this so-called “fee war” has led to some providers offering investors index trackers and ETFs with zero management fees and, in one case, a temporary negative fee, meaning investors are paid to invest.

Vanguard, however, has long placed emphasis on reducing fees, with the company’s late founder Jack Bogle regularly arguing that the best predictor of investment returns was the amount of fees paid.

ETF Old fee New fee
FTSE All-World UCITS ETF 0.25% 0.22%
FTSE Developed Asia Pacific ex Japan UCITS ETF 0.22% 0.15%
FTSE Developed Europe ex UK UCITS ETF 0.12% 0.10%
FTSE Developed Europe UCITS ETF 0.12% 0.10%
FTSE Developed World UCITS ETF 0.18% 0.12%
FTSE Emerging Markets UCITS ETF 0.25% 0.22%
FTSE Japan UCITS ETF 0.19% 0.15%
EUR Corporate Bond UCITS ETF 0.12% 0.09%
EUR Eurozone Government Bond UCITS ETF 0.12% 0.07%
U.K. Gilt UCITS ETF 0.12% 0.07%
USD Corporate 1-3 Year Bond UCITS ETF 0.15% 0.09%
USD Corporate Bond UCITS ETF 0.12% 0.09%
USD Treasury Bond UCITS ETF 0.12% 0.07%

 

Index Fund Old fee New fee
Emerging Markets Stock Index Fund 0.27% 0.23%
Global Small-Cap Index Fund 0.38% 0.29%
Japan Stock Index Fund 0.23% 0.16%
Pacific ex-Japan Stock Index Fund 0.23% 0.16%
SRI European Stock Fund 0.30% 0.16%
SRI Global Stock Fund 0.35% 0.22%
Euro Government Bond Index Fund 0.25% 0.12%
Euro Investment Grade Bond Index Fund 0.30% 0.12%
Global Corporate Bond Index Fund 0.25% 0.18%
Global Short-Term Corporate Bond Index Fund 0.25% 0.18%
Japan Government Bond Index Fund 0.25% 0.12%
U.K. Government Bond Index Fund 0.15% 0.12%
U.K. Investment Grade Bond Index Fund 0.15% 0.12%
U.K. Short-Term Investment Grade Bond Index Fund 0.15% 0.12%
U.S. Government Bond Index Fund 0.25% 0.12%
U.S. Investment Grade Credit Index Fund 0.30% 0.12%
FTSE Developed World ex-U.K. Equity Index Fund 0.15% 0.14%
FTSE Global All Cap Index Fund 0.24% 0.23%
FTSE U.K. All Share Index Unit Trust 0.08% 0.06%
FTSE U.K. Equity Income Index Fund 0.22% 0.14%
U.K. Inflation-Linked Gilt Index Fund 0.15% 0.12%
U.K. Long Duration Gilt Index Fund 0.15% 0.12%

 

 

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