Vanguard cuts fees on dozens of passive funds

by Tom Bailey from Money Observer |

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

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 Vanguard UK Gilt UCITS ETF (LSE:VGOV) for just 0.07%.

Some of the biggest fee cuts were to Vanguard's "socially responsible investing" index funds. Both the Vanguard SRI European Stock fund and Vanguard 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.

This article was originally published in our sister magazine Money Observer. Click here to subscribe.

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