Vanguard Cuts ETF Fees as Race-to-Zero With BlackRock Heats Up

(Bloomberg) -- The race to cut fees in exchange-traded funds is getting ever more intense.

Vanguard Group Inc., the second-largest provider, lowered expense ratios for 68 ETFs and mutual funds Friday, including the world’s largest funds focused on emerging equities and European stocks. It’s the third set reductions by Vanguard since late December, and comes after similar moves in the past year by State Street Corp. and the biggest ETF provider, BlackRock Inc.

The fund operators are seeking to hold on to market share amid fast expansion in the ETF industry, which has more than $3 trillion in assets globally, and growing conviction that many investors are best served by low-cost index funds. Vanguard’s move is good news for money managers looking to tap into emerging stocks and equities in Europe after run-ups in both over the past year.

“This is an attempt to gain new assets, but more importantly not to lose assets when your competitor is cutting fees,” said Mohit Bajaj, a director of ETF trading solutions at WallachBeth Capital in New York. “This is great for investors.”

Most of the $284 billion taken in by ETFs during the past year was going to products with an average fee of 9 basis points or less, data compiled by Bloomberg Intelligence show.

The Vanguard FTSE Emerging Markets ETF, the world’s largest fund invested in developing stocks, has seen its expense ratio cut by 1 basis point to 14 basis points, the same as BlackRock’s iShares Core MSCI Emerging Markets ETF, the third-biggest fund invested in developing stocks. The iShares fund has been a standout this year, with investors putting $4.2 billion into the product, the most among 2,000 U.S. competitors.

The expense ratio for Vanguard FTSE Europe ETF, the world’s largest ETF invested in European stocks, declined to 10 basis points from 12 to match the fee for the iShares Core MSCI Europe ETF.

Vanguard’s exchange-traded funds gathered $93 billion in 2016, up from $76 billion a year before. BlackRock’s ETFs attracted about $140 billion last year.

To contact the reporter on this story: Elena Popina in New York at epopina@bloomberg.net.

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Jeremy Herron at jherron8@bloomberg.net, Brendan Walsh, Randall Jensen

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