Analyst: Vanguard

But Mr Rampulla says he is also considering rolling out two types of products in which Vanguard specialises in the US but that have only recently hit the UK market: target-dated funds and ETFs.

Target-dated funds are particularly relevant in the fast-growing UK market for defined contribution pension schemes – core to the US fund management industry. "There’s been a lot of interest there," Mr Rampulla affirms.

He is less clear about the need for ETFs, in which Vanguard has a large stake in the US. "Is there a demand here? I’m not sure. There’s a lot of talk, but it’s all been institutional so far. Our tracker funds are mostly lower cost than ETFs, but if there is a legitimate need for an ETF vehicle, we’d probably want to deliver that," he says.

One reason why Vanguard is able to keep its costs low is that it does not pay for distribution fees. Traditionally, this would have been an overwhelming competitive disadvantage in the retail market. Vanguard’s UK range is not on offer on the provider-funded platforms like Cofunds or Skandia Investment Solutions. It is only available direct or through smaller, fee-funded platforms like Transact, Standard Life or Alliance Trust – though direct customers face a steep investment minimum of £100 000.

But with the FSA banning commission from 2012, Mr Rampulla hopes uptake will soon swell. He points across the Atlantic, where fee-based advice has taken off strongly over the past decade, as a model for how things might pan out in the UK. Vanguard used to be a pure institutional player in the US, but launched into the IFA market in 2002 as a result of changing business model and has since gathered $250bn under management through the new channel.

Arguably, the potential for growth is even stronger in the UK because costs are otherwise so high. "Consumers need a better deal here, whether passive or active," says Mr Rampulla. "Active in particular should be less expensive and more transparent."

The concern with transparency is behind one charge on some Vanguard funds that has confused the industry and requires explanation. Investors in the company’s UK tracker products pay a 50bps purchase fee to cover stamp duty reserve tax – the 50bps levy by HMRC on all UK stock purchases. In most funds, this tax comes out of the total return whenever a new investor enters the fund, but

Vanguard considers this an unfair drag on performance for buy-and-hold investors, who are in effect cross subsidising turnover. Investors in the FTSE All-Share tracker have to pay more upfront, therefore, but they can be sure their money is not being used to pay future investors’ taxes.