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Rating:Reuters Expects Vanguard and FTSE to Trigger an Index Price War Not Rated 0.0 Email Routing List Email & Route  Print Print
Monday, October 08, 2012

Reuters Expects Vanguard and FTSE to Trigger an Index Price War

News summary by MFWire's editors

After winning $170 billion in Vanguard mandates last week, the London Stock Exchange Group's FTSE "has ambition to grow our share further" here in the States, in the words of Jonathan Horton, president of FTSE North America.

Reuters' Rodrigo Campos and Jessica Toonkel think this urge to expand "could trigger a price war among providers of stock indexes for use by fund groups eager to cut costs." The reporters have a new story that suggests the Vanguard deal may be "the first shoe to drop" among mutual funds moving from name-brand indexes to cheaper, less heralded brands.

"The concern is that BlackRock is going to be next and try to play hardball," Chris Willis, director of wealth management at R.W. Roge & Co., told the newswire.

Another money manager told Campos and Toonkel that Vanguard's move could be a "thesis breaker" for MSCI.

But other well-known index providers are still banking that their brands will give them leverage in price negotiations. Ken O'Keeffe of Russell, for instance, told the reporters that his firm does not "see an issue for Russell-based products in terms of fees," and that Vanguard has assured Russell that their move to FTSE "does not affect the Vanguard ETF space on Russell Indexes."

But there are some who doubt that investors will pay more for a name-brand index. Count Vanguard among them.

"I believe most investors are seeking asset class exposure, not branded asset class exposure, with the S&P 500 being a possible exception," said Joel Dickson, senior ETF strategist at Vanguard, told Campos and Toonkel. 

Edited by: Chris Cumming

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