In which Vanguard Suge Knights the entire fund industry
- Joshua M Brown
- May 21st, 2012
Is it all about fees? As an RIA, I'm very fee conscious, especially with ETFs. There are a handful of things I'll pay up a bit for in terms of internal expense costs (quarterly rebal, active management) but for a brand name or a high concept ETF alone? No way.
And apparently I'm not in the minority. Vanguard, which my wholesalers at other fund purveyors refer to as a not-for-profit at this point, simply owns the space this year. John Spence at ETF Trends has the story:
One of every three dollars invested in mutual funds and ETFs through the first four months of the year went to Vanguard, reports Jason Kephart at InvestmentNews.
Year to date through the end of April in the ETF business, Vanguard had gathered $21.6 billion so far in 2012, while BlackRock’s iShares collected $13.3 billion and State Street added $7.2 billion, according to data from the ETF Industry Association.
“Vanguard collected $4.4 billion in April, which was four times more than the next closest provider and nearly twice as much as the rest of the industry combined. The company’s ETF offerings last experienced a monthly outflow in February 2003,” says investment researcher Morningstar.
How are they doing this? A large and noticeable difference in basis points for each fund. The public has given up on active management and they don't care much for anyone's brand anymore. This is exacerbated by the fact that interest rates are so low - with a bond fund this cost is a key differentiator and everyone is buying bond funds this year.
We're talking serious dominance here.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.