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Wednesday, April 03, 2013

Vanguard Pooh-Poohs the ETF Fee War

News summary by MFWire's editors

You may think ETF fees are falling, but one Vanguard investment strategist argues that the reality is somewhat different.

In a blog devoted to Vanguard advisors, Joel Dickson, a senior investment strategist and a principal in Vanguard Investment Strategy Group writes that "while some firms might be trumpeting their offerings of loss-leader products or a small subset of low-cost ETFs, a closer look at recent industry-wide expense ratio data indicates that presumptions of ever-declining expense ratios among ETFs may be more hope than reality."

In fact, Dickson argues, the focus on declining expense ratios has obscured a pretty consistent trend in charges that ETF investors have paid. According to data from Morningstar, Inc., 83% of ETFs’ actual fees, in basis points, as reported in their annual reports, stayed the same or increased during the 2011-2012 period, while 17% experienced a decrease. He also provides charts supporting this argument.

"The truth is, as ETF and mutual fund assets grow, economies of scale generally help to reduce expense ratios," he writes.

Read more of his points in the article

Edited by: Tommy Fernandez

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