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Rating:Barron's Says Don't Get Carried Away With the Fee-War Buzz Not Rated 0.0 Email Routing List Email & Route  Print Print
Monday, October 15, 2012

Barron's Says Don't Get Carried Away With the Fee-War Buzz

News summary by MFWire's editors

Maybe all the talk about an ETF fee war between BlackRock and Vanguard is just a bunch of noise.

Barron's reporter Brendan Conway Conway doesn't foresee an escalating fee war between the two firms. He writes that Vanguard's decision to drop MSCI as its indexer means the firm is ceding some institutional business to BlackRock's iShares, while taking aim at the cost-conscious individual investor.

"The more that Vanguard focuses on cost and small-time investors' needs, and iShares on trading and other institutional issues, the less the two companies need to beat each other up with price cuts and other enticements," Conway writes.

Conway also has some details about Vanguard's new indexes, which he says use techniques that "promise to reduce several large, popular funds' trading costs."

The University of Chicago Center for Research in Security Prices (CRSP), which along with the FTSE Group will be the firm's new indexer, uses a technique called "packeting," which allows stocks to be shared by several indexes. This means Vanguard's new index funds won't have to sell its entire holding of a small-cap company, for instance, when it moves up to mid-cap.

The CRSP also randomly selects the days when it gathers market-cap data, which Conway says "serves to cut down on the information available to would-be arbitrageurs." 

Edited by: Chris Cumming

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