Daily ETF Watch: Vanguard Fees Drop

April 29, 2014

Eight Vanguard ETFs are now a bit cheaper.

Expense ratios on eight Vanguard ETFs are now 10 percent lower, while fees on a ninth ETF rose 20 percent—the latter increase a reflection of expenses incurred indirectly by the funds through investments in business development companies, according to the firm.

The ETF with higher fees is the Vanguard Small-Cap Value ETF (VBR | A-100). Its annual expense ratio rose to 0.12 percent, or $12 for every $10,000 invested, from 0.10 percent.

The funds whose expense ratios fell by 10 percent (from 0.10 percent, or $10 for every $10,000 invested, to 0.09 percent) include:

Vanguard’s funds are structured so that expense ratios are a function of total assets under management at the end of the funds’ fiscal years such that fees drop as a matter of course as assets in the strategy increase. The opposite can be true as well, meaning expense ratios can move higher should assets drop in particular funds.

“We provide services at cost, returning any ‘profits’ to fund investors in the form of lower expense ratios,” Vanguard said in a press release on Monday. “It’s a structure that enables us to pass along economies of scale—and reduce expenses—as fund assets grow.”

Launches

Deutsche Bank on Wednesday, April 30, is launching its much anticipated db X-trackers Harvest MSCI All China Equity Fund (CN) that will invest directly in the broadest possible spectrum of large- and mid-capitalization Chinese companies, according to a NYSE communique.

Competition is heating up among issuers, including Market Vectors, which has put into registration a similar broad China-focused ETF, to offer investors access to the world’s second-largest economy.

Both DB’s and Market Vectors’ funds will track the MSCI All China Index, which is designed to capture large- and mid-capitalization representation across all China securities listed in China, Hong Kong, the U.S. and Singapore.

Market Vector’s proposed offering has an expense ratio of 0.78 percent, or $78 for every $10,000 invested while CN’s expense ratio is 0.62 percent, or $62 for every $10,000 invested, according to a regulatory filing.

Filing

Alpha Architect Funds, a newly formed Broomall, Pa.-based investment advisor, has updated regulatory paperwork seeking permission to launch actively managed ETFs, the latest new sponsor to jump into an increasingly crowded field of ETF providers.

The firm’s initial proposed funds include:

  • ValueShares U.S. Quantitative Value ETF
  • ValueShares International Quantitative Value ETF
  • MomentumShares U.S. Quantitative Momentum ETF
  • MomentumShares International Quantitative Momentum ETF

With much of the pure-beta market accounted for, fund issuers alike are increasingly turning toward so-called enhanced beta and active strategies to stake claims in unexplored pockets of the ETF world.

As things stand, BlackRock’s iShares, State Street Global Advisors and Vanguard together currently manage more than 80 percent of the $1.745 trillion now invested in U.S.-listed ETFs, according to data compiled by ETF.com Analytics.

Active strategies, while gaining in popularity, account for less than 1 percent of total assets under management, a measure of the challenge Alpha Architect Funds faces. The company didn’t reveal the proposed funds’ fees or ticker symbols.

 

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