Vanguard is making the biggest expense-ratio reduction in its 50-year-history, a move it says will save investors more than $350 million in 2025.
The cuts are being made to 186 mutual fund and exchange-traded share classes across 87 funds and vary by fund. For example, a random sampling of stock funds yields these fee changes:
FTSE Developed Markets ETF (VEA) was 0.06%, reduced to 0.03%
Dividend Appreciation ETF (VIG) was 0.06%, reduced to 0.05%
Information Technology ETF (VGT ) was 0.1%, reduced to 0.09%
A complete list of funds and their fee reductions can be found here.
“Jack Bogle founded Vanguard in 1975 with a simple purpose — to design an investor-owned company that would serve a single constituency, our clients,” Vanguard’s Chief Executive Officer Salim Ramji said in a news release. “At Vanguard, we’re focused on creating value for our investors, not extracting value from them. We’re proud to build on Vanguard’s legacy of lowering the costs of investing — which we have done more than 2,000 times since our founding — by announcing our largest ever set of expense ratio reductions. Lower costs enable investors to keep more of their returns, and those savings compound over time.”
Vanguard is known for the low cost of its index and actively managed products across all asset classes, including equity, bond, money market and multi-asset. The company said in the release its lower costs are correlated to the performance of its mutual funds and ETFs. Over the past decade, 84% of Vanguard funds have exceeded their peer group averages.
“Vanguard’s strength as an industry-leading active manager and index pioneer has only grown over the years, in part due to our low costs,” said Vanguard President and Chief Investment Officer Greg Davis. “When thinking about our actively managed funds, our portfolio managers can take investment risk strategically as they don’t have to overcome the hurdle of high fees to add value.”
Vanguard reported that 91% of its active bond funds and ETFs did better than their peer group average over the past decade. The firm’s actively managed fixed income funds and ETFs have a weighted-average expense ratio of 0.10%, compared with the industry average of other firms — 0.53% — for active funds and ETFs. Vanguard’s bond index funds have a weighted-average expense ratio of 0.05%, compared with the 0.11% average of other firms.
The expense ratio reductions reduce costs across Vanguard’s U.S. equity, international equity, and money market funds. The changes in expense ratios are effective immediately.
