Vanguard Cuts VWO Cost To 0.22%

February 08, 2011

Vanguard Group, the No. 3 U.S. ETF firm whose Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO) surpassed the iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM) as the biggest U.S. emerging markets ETF last month, cut the annual expense ratio on the popular fund by 5 basis points to 0.22 percent to reflect the growing size of the fund.

VWO, now a $45.47 billion fund, became the biggest U.S. ETF on Jan. 18, largely because it is the cheaper of the two funds. EEM, the iShares fund, now costs investors 0.69 percent, having dropped its expense ratio from 0.72 percent at the start of 2001. iShares cut fees on EEM for the same reason, as the fund grew by more than $2 billion in 2010. Vanguard’s VWO, meanwhile, grew by almost $20 billion.

The lower price, plus better performance, had led many in the ETF industry to conclude for the better part of a year that it was only a matter of time before VWO overtook EEM. The iShares ETF is now a $39 billion fund. Emerging markets were immensely popular among investors in 2010, though civil unrest in Egypt has slowed the fund.

A Vanguard official told about VWO’s latest fee cut this week on the sidelines of the “4th Annual Inside ETFs Conference” in Hollywood, Florida.


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