Vanguard Asset Management is to launch a string of exchange-traded funds (ETFs) in the UK, as the group looks to target long-term investors who are gravitating to the products’ ultra-low annual charges.
ETFs tend to offer extremely low annual charges but higher costs to deal in and out of the funds, while ‘tracker’ funds - the other major passive investment type - are cheaper to enter and exit but cost more in annual charges.
Nick Blake, head of retail at Vanguard, said the group was lining up a slew of ETF launches as long-term ‘buy and hold’ investors flock into them.
He said the group has 28 open-ended tracker funds now available to UK investors, and the group wants to build a matching range of ETFs. It currently has just nine of the products.
“Eventually the ETF line-up will mirror the fund line-up,” Mr Blake said, adding that no new launches were imminent but plans were being drawn up.
The suite of ETFs currently consists of eight equity index trackers covering the major single-country developed markets, Europe, emerging markets and world indices, including a global equity income fund.
There is only one bond ETF, tracking UK government bonds. Mr Blake said the firm was looking to build up its fixed income offering - the open-ended range currently has six bond trackers.
Mr Blake said it was much harder to establish a bond ETF than an open-ended bond tracker fund, as 7,000 individual securities all need to be purchased in order to construct a physically-replicated index tracker.
Since Vanguard listed its first tranche of five ETFs in May 2012, the range has attracted strong inflows and the total assets in the funds now stand at $1.8bn (£1.2bn).
The firm prides itself on its low up-front costs, and Mr Blake said the increased liquidity that has come with the new inflows means that dealing spreads on the listed ETFs are now as tight as any of their peers in the market. He claimed Vanguard was not just bringing in money from new ETF investors but also shifting market share away from competitors.
According to research by independent body ETFGI, Vanguard has brought in the most net new money globally of any ETF provider this year, with inflows of $36.2bn for the year to the end of July.
Mr Blake added that he was continuing to work with fund platforms in order to improve investors’ access to ETFs. Many fund supermarkets still either do not provide ETFs or struggle to facilitate trades on them, and Mr Blake said even wrap platforms need to get better at dealing with ETFs.
While Vanguard is known as a passive provider in the UK, a third of its assets in the US are in actively managed funds. Mr Blake said one day Vanguard would consider managing active funds in the UK but added that it was “not in the immediate plan”.
“If we could genuinely do valuable high quality low cost active management in the UK then we would,” he said.
