Displaying items by tag: vanguard

Friday, 03 August 2018 09:42

How Zero Fees Will Change the Industry

(New York)

It was long awaited, but still hit the market like a hammer. It was one of those things that you can prepare for over a long period, yet are inevitably shocked when it arrives. In this case, it was the long-awaited release of a zero fee index fund. Fidelity was the first to do it, and while it was anticipated, the move is likely to have far-reaching effects on the industry. For instance, one of the big changes is that large index funds will likely no longer pay licensing fees to the indexes themselves. At the same time though, indexes will proliferate for more narrow and niche areas designed to track all manner of themes. Fees will likely continue to fall, even on the more complex products.

FINSUM: Asset management is seeing a very serious race to the bottom, which is reflected in share prices lately. Two thoughts come to mind. Firstly, those with huge scale will be the big winners as the industry grows more consolidated. Secondly, how long before retirement funds seeing a reckoning and a big move out of expensive products (they are paying an average of 61 bp in fees)?

Published in Wealth Management
Thursday, 02 August 2018 09:17

Fidelity Just Crossed the Line on Fees


The moment that many asset managers have been dreading has finally arrived. Fidelity announced yesterday that it was slashing prices on many of its funds, and crucially, offering two new index mutual funds with no fees and no minimums. Thus, the Rubicon has finally been crossed—the first broad index funds with zero fees, and no minimums. Many top asset management stocks fell considerably on the news. Remember that asset managers can still make money on funds with zero fees—through stock lending—but they need considerable scale to make that money meaningful.

FINSUM: It was only a matter of time before this happened. We expect Vanguard will follow suit quite soon, as will BlackRock, as lower fees have been by far the biggest selling point in the market for years.

Published in Wealth Management
Friday, 13 July 2018 10:03

The ETF Price War is Deepening

(New York)

Advisors will see it first hand, but it is still worth discussing the intensification of the current ETF price war. While the industry has been slashing fees for years, things have escalated significantly over the last few months. State Street has introduced a suite of ultra cheap funds, but more recently, BlackRock and Vanguard have made major moves. BlackRock cut fees on several stock and bond ETFs last month, and just last week, Vanguard announced that almost every ETF on its platform would be commission-free. The ETF market is supposed to grow to $10 tn in the next decade, and fees have fallen 30% in the last decade.

FINSUM: This is great news for investors, but it will certainly drive further consolidation in the ETF business as massive scale is needed to support these prices cuts. We ultimately worry about such imbalance in the market.

Published in Eq: Large Cap
Tuesday, 03 July 2018 09:29

Vanguard Cuts All Commissions on Rival Funds

(New York)

The fee war on ETF trading continues, both for advisors and for retail. Trading platforms providers have been engaged in an ongoing struggle to attract assets by slashing the price of trading, and Vanguard just took a big step. While Vanguard used to charge retail investors a flat fee for trades depending on their AUM (trading Vanguard funds was always free), the company is now cutting transaction fees for aboutx 1,800 ETFs on its platform. No more trading fees at all. The move follows Fidelity’s recent addition of more fee-free ETFs. FINSUM: This is a big deal. 1,800 fee-free ETFs dwarfs the competition and we definitely think it will help Vanguard gather more assets, both retail and institutional.

Published in Wealth Management
Wednesday, 31 January 2018 10:48

ETFs at Risk of Manipulation

(New York)

Vanguard, one of the preeminent global fund managers, has just gone on the record warning about a big and growing danger for ETFs. Vanguard says that “predators” are increasingly front-running ETFs at the expense of legitimate investors. Because most ETFs disclose their daily holdings, and are benchmarked to an index, they are susceptible to manipulation by those who trade ahead of the reconciliation. Vanguard hopes that regulators will not approve new rules which would demand even greater transparency in the ETF marketplace, as this could worsen the problem. Vanguard currently only discloses its holdings with a one-month lag to mitigate frontrunning, but could be forced to do so on a daily basis.

FINSUM: This is one of the areas of markets where transparency may actual work counter to the interests of the everyday investor.

Published in Eq: Large Cap
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