US ETF Industry: Ch-Ch-Changing

July 25, 2017

Earlier this year, BlackRock began implementing more algorhythmic tools on its active manager side, leading to headlines that implied the firm was replacing humans with robots in a cost-cutting move.

BlackRock CEO Larry Fink has disputed that characterization, saying in April: “We’ll have the same amount of employees in our equity division a year from now than we do today.”

But even at the top of the ETF food chain, their changes on the business models on investment cause their costs to fall to earth.

Success Bring Succession

Also this month, there was some big executive news at Vanguard. Chief Investment Officer Tim Buckley was named president and director of the index fund giant. As of Jan. 1, 2018, he will also succeed Bill McNabb as only the company’s fourth chief executive officer since it was founded in 1975.

Vanguard is the second-largest ETF issuer, with $736 billion in AUM in its 70 ETFs. It was the first firm to promote index funds for retail investors, with the Vanguard 500 serving as its flagship product. Across all its products—which include more than 300 mutual funds and ETFs—the firm manages nearly $4 trillion.

When McNabb took the CEO reins in 2008, the firm’s total AUM was around $1 trillion. Clearly the firm has been on a roll under his leadership, and there’s nothing really that’ll stop the momentum of investors flocking to the not-for-profit asset manager.

While Vanguard has been said to be eyeing Europe for its next leg up in growth, here in the States we can expect the company’s ETFs to continue to see their fees fall as its funds’ assets build. That’s the way they’re designed, which is a business model that will never change.

Drew Voros can be reached at [email protected]


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