Vanguard has cut fees on almost half of its European funds, in a major escalation of the ongoing price war within the European asset management market.
The second-largest asset manager in the world slashed fees on 46 of its European funds, 36 of which are available to UK retail investors, in a move that could threaten its rivals’ profits.
“For too long, investors have been poorly served with high-cost, complex investments,” said Sean Hagerty, head of Vanguard Europe.
Pennsylvania-based Vanguard, which launched in the UK in 2009, has built a reputation for undercutting rivals’ fees to win over new clients.
Founder John Bogle, who died in January agd 89, pioneered low-cost passive index funds, and was dubbed the “father of indexing”.
This strategy helped Vanguard expand to become the second-largest asset manager in the world with which has £5.7 trillion (£4.4 trillion) assets under management, behind Blackrock’s almost $7bn empire.
Vanguard’s full offering in the UK – including exchange-traded funds (ETFs), index funds, and actively-managed funds – now have an average ongoing charges figure (OCF) of 0.20 per cent.
Its index mutual funds now have an average OCF of 0.15 per cent, while its ETF index funds have an average of 0.10 per cent.
The move follow’s Vanguard’s decision to cut fees across its range of UK-domiciled actively managed fund range in June.
“More work needs to be done to ensure investors understand the impact of costs on investment returns,” said Hagerty.
“There is still a misconception that the more you pay for an investment, the better it performs. In reality, costs really impact the returns investors make – every pound paid in fees is a pound off investors’ returns.”