Vanguard, the third-largest U.S. issuer of exchange traded funds, announced Thursday it has lowered the annual expense ratios on five of its international ETFs.
That group includes the Vanguard FTSE Emerging Markets ETF (VWO) , the largest emerging markets ETF by assets. As of Feb. 24, VWO’s annual expense ratio is 0.15%, down from 0.18%. VWO’s new expense ratio makes cheaper than 91% of rival funds.
“Vanguard has long been a low-cost leader, which can be attributed to our unique corporate ownership structure and our relentless pursuit to operate more efficiently and productively. Vanguard is owned by our funds—and, in turn, collectively owned by the fund shareholders. We provide services at cost, returning any “profits” to fund investors in the form of lower expense ratios. It’s a structure that enables us to pass along economies of scale—and reduce expenses—as fund assets grow,” said the Pennsylvania-based company in a statement.
Two Vanguard ETFs – the Vanguard FTSE All World ex-US Small-Cap ETF (VSS) and the Vanguard Global ex-U.S. Real Estate ETF (VNQI) – saw fee reductions of five basis points. VSS now charges 0.2% while VNQI’s expense ratio has been pared to 0.27% per year.
The Vanguard Total International Stock ETF (VXUS) now has an annual expense ratio of 0.14%, down from 0.16%. That is lower than 89% of funds with comparable holdings, according to Vanguard. The Vanguard Total World Stock ETF (VT) saw a modest fee cut to 0.18% from 0.19%.
Vanguard has been one of the most prolific cutters of fees among major ETF issuers. For example, the firm pared expenses on seven ETFS in April 2013. [Vanguard Cuts Fee on Bond ETFs]
The following month, the firm lowered the fees on the Vanguard Dividend Appreciation ETF (VIG) , the largest U.S. dividend ETF, and in December 2012, Vanguard reduced costs on 22 of its ETFs. [Vanguard Trims Expenses on 22 ETFs]
“In addition, Vanguard operates a ‘tight ship.’ We spend modest amounts on marketing relative to competitors, do not pay third parties to distribute our funds, and negotiate favorable fee arrangements with our external investment advisors and benchmark providers, all of which result in significant cost savings for our clients over the long term,” said Vanguard in the statement.
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