Vanguard Group Inc., the world’s second-largest ETF issuer, is making what it says is its biggest fee cuts in the company’s 50-year history, trimming the expense ratios of dozens of mutual fund and ETF share classes that it claims will save investors more than $350 million in 2025.
The company cut fees to 168 mutual fund and exchange-traded share classes, including the $87.4 billion Vanguard Information Technology ETF (VGT), which had its expense ratio cut 0.01% to bring it to 0.09%. according to a list. of effected funds. The reductions affect both active and passive strategies, Malvern, Pennsylvania-based Vanguard said in the statement.
Fee battles are a long-standing feature of the exchange-traded fund industry. The Vanguard S&P 500 ETF (VOO) is on the cusp of becoming the world’s largest ETF, in part because its fees are one-third of its larger—for now—rival, the SPDR ETF 500 Trust (SPY). Investors focus on costs eating into returns, particularly as higher interest rates create opportunities in fixed-income markets. For long-term investors, even small reductions in fees can translate into thousands of dollars in savings over time through compounding returns.
CEO Salim Ramji is slashing the fees barely seven months after assuming the helm of the company, which manages $2.64 trillion—second to BlackRock Inc.—in 86 ETFs.
“Lower costs enable investors to keep more of their returns, and those savings compound over time,” Ramji said in the release.
Within fixed income, Vanguard’s actively managed bond funds now carry a weighted-average expense ratio of 0.10%, compared to the industry average of 0.53% for active funds from other firms, according to Vanguard. The firm’s bond index funds feature a weighted-average expense ratio of 0.05%, less than half the competitor average of 0.11%.
The timing of these fee reductions may prove helpful for for bond investors, as yields are expected to stabilize at higher levels than seen in the past 15 years, Greg Davis, Vanguard president and chief investment officer, said in the statement.
The company said 91% of its active bond funds and ETFs have outperformed their peer group average over the past decade.
The expense ratio reductions span across U.S. equity, international equity, and money market funds as well, with changes effective immediately, the company said.
Vanguard exchange-traded funds carrry an average expense ratio of 0.09%, according to etf.com data. VOO, its largest, holds nearly $624 billion in assets.