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Vanguard regime change to lead to ETF industry shakeup


Todd Rosenbluth of CFRA has commented on the news that Bill McNabb will step down as CEO of Vanguard at the start of 2018.

He writes that Vanguard has helped to bring cost savings to many fund investors, including those that have chosen a different asset manager to work with.

“Vanguard tends to have among the lowest cost products in their investment style and regularly lower fees, benefitting from its scale. In addition, when they have had success, it has often resulted in peer providers lowering fees and/or launching new, cheaper products designed to regain lost market share. The successful iShares Core Series and Fidelity’s sector ETF lineup are a couple of examples.

“Vanguard’s mutual funds and ETFs have gained additional share the last few years as investors have focused increasingly on lower-cost diversified products. While the firm is known for its passive funds, active offerings (e.g. Vanguard Wellington, Vanguard PRIMECAP and Vanguard Dividend Growth) have established strong records and remained popular despite outflows for many mutual fund peers.

“Though Vanguard has fewer ETFs than other industry heavyweights, the firm has greater than USD1 billion on average in these offerings. However, CFRA expects the firm to launch active equity and smart beta ETFs in the near term, leveraging their strong quantitative management team. Such a move will further shakeup the ETF industry.”

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