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Friday, September 19, 2014

Vanguard, Or All the Hedgers?

News summary by MFWire's editors

It's been a rough media week for hedge fundsters. On Monday $300B pension plan giant CalPERS told the world that it's leaving hedge funds behind, a move whose potential implications have subsequently been widely written about, even here on MFWire. And now the Wall Street Journal is comparing the hedge fund industry as a whole to low-cost mutual fund titan Vanguard [profile].

Yesterday the WSJ's Kirsten Grind reported on Malvern, Pennsylvania-based Vanguard hitting the $3-trillion assets under management milestone. Citing eVestment data, the WSJ puts that $3-trillion figure in perspective by noting that Vanguard's AUM now equals all hedge funds' AUM combined as of May.

Yet by a different metric, revenue, the hedgers are probably still much bigger. If hedge fund firms just earn the 200-basis-point piece of the old "two and twenty" pricing (i.e. two percent of AUM and 20 percent of gains), that would put the hedge fund industry's total annual revenue at around $60 billion. Yet Vanguard, with its low-cost approach and plethora of indexed products, probably averages much less than 100 bps on its $3 trillion.

So, by client assets Bill McNabb and his team now rivals hedgers. By fees, probably not so much, at least not yet. 

Edited by: Neil Anderson, Managing Editor


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