Vanguard’s Joel Dickson on ETF Index Switch

ETF Trends

ETF Trends Editor Tom Lydon speaks with Vanguard’s Senior Investment Strategist, Joel Dickson, about the firm’s decision to change benchmarks at 22 of its index funds, including ETFs.

The asset manager said it plans to transition six international stock index funds to FTSE benchmarks and 16 U.S. stock and balanced index funds to new benchmarks developed by the University of Chicago’s Center for Research in Security Prices (CRSP). The funds had been tracking benchmarks provided by MSCI (MSCI).

Dickson says Vanguard didn’t make the move lightly. [Vanguard Changing ETF Indices]

“We’ve been looking at this for several years,” the Vanguard executive tells Lydon. “Over time, a larger and larger percentage of the expense ratio of ETFs has come in the form of index licensing fees.”

“We negotiated licensing agreements for these benchmarks that we expect will enable us to deliver significant value to our index fund and ETF shareholders and lower expense ratios over time,” Gus Sauter, chief investment officer at Vanguard, said in a recent Reuters report. [Emerging Market ETF Battle]

Dickson tells Lydon that Vanguard saw an opportunity to help return the economies of scale back to the ETF investor with new index licensing agreements.

Meanwhile, major index providers “have converged over the past decade in terms of best practices and methodology,” he added. This trend has resulted in more choice for investors for indices that provide market exposure.

Watch the video to see the full interview.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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