Vanguard Slashes Fund Fees by $350M in Largest Cost Cut Ever
Money talks, but Vanguard’s new strategy is speaking to both investors’ hearts and wallets. The investment giant announced yesterday that it would reduce expense ratios by an average of 20% across 87 funds — a move that’ll save investors $350M this year. The sweeping changes, spearheaded by new CEO Salim Ramji, affect nearly half of Vanguard’s US fund lineup and reinforce the firm’s commitment to low-cost investing.
- The company’s growth has been astronomical, with investors pouring $306B into US Vanguard ETFs last year, enabling greater economies of scale and subsequent fee reductions.
- Currently, 86% of Vanguard’s mutual fund and ETF assets sit in the lowest-cost decile of their peer groups, with their index fixed-income ETFs averaging just 0.037% in expenses.
Low fees, high advantage: The move could pressure other asset managers — including big competitors like BlackRock’s iShares and State Street’s SPDR — to follow suit in what’s historically been dubbed “the Vanguard effect.” The industry has already seen the asset-weighted average mutual fund fee plummet from 0.87% in 2004 to 0.36% in 2023. With a focus on both passive and active funds, Vanguard’s president, Greg Davis, emphasizes that lower fees mean portfolio managers can be more patient, avoiding unnecessary risks to offset expenses — a competitive advantage that keeps getting sharper.
