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Friday, February 01, 2013

"Time Will Tell" Whether Vanguard's MSCI Shift Has Been a Mistake

News summary by MFWire's editors

In October, Vanguard [profile] revealed plans to drop index provider MSCI in favor of FTSE and CRSP. Four months have passed since the announcement, and the Financial Times is worried the switch is going badly for the low cost mutual fund titan.

For example, the FT that Vanguard's emerging markets ETF suffered about $900 million in outflows in Q4 (i.e. after the shift was announced). For three years the Vanguard ETF had been beating out iShares' rival ETF in terms of inflows, yet in Q4 that flipped and the iShares offering brought in $8.9 billion.

"One wonders whether the cost savings of the index switch were worth the risk of forgoing further asset accumulation for Vanguard," Bernstein Research analyst Luke Montgomery told the paper.

"Time will whether or not the shift has been a mistake," Alex Matturri, chief executive of S&P Dow Jones, told the FT. "The costs of such a switch is huge such change is a real cost to investors."

S&P Capital IQ fund analyst Todd Rosenbluth and Vanguard senior investment strategist Joel Dickson also weighed in for the article. 

Edited by: Neil Anderson, Managing Editor

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