Vanguard Emerging Market ETF became the third-largest U.S. exchange-traded fund this week, passing the rival BlackRock Inc. fund that just a year ago was twice as big, and adding to evidence that investors are migrating to the cheapest offerings.

Businessweekreports Vanguard’s fund had $46.2 billion as of Wednesday, more than the $46 billion in iShares MSCI Emerging Markets, according to data compiled by the magazine. At the end of 2009, the BlackRock fund was twice as large as Vanguard’s, according to Chicago-based Morningstar Inc.

“There is a pricing war going on,” Paul Justice, director of ETF research at Morningstar told the publication. “Investors see these as commodities and are saying, ‘Why not go for the one with the lowest expense.’”

Vanguard has captured market share in the almost $1 trillion U.S. market for ETFs by using the same low-price strategy it employed to become the nation’s largest mutual-fund firm, Businessweek notes. Vanguard’s emerging market ETF charges a fee of $0.27 cents per $100 invested compared with $0.69 for its BlackRock rival.

Vanguard’s competitors may be forced to cut prices on certain products, said Dave Nadig, director of research at Index Universe, a San Francisco-based financial media company.

“BlackRock must be wringing its hands,” he said in a telephone interview with Businessweek.

The two emerging-market ETFs ranked third and fourth in asset size as of Dec. 31, according to State Street Corp. The biggest ETF was the $90 billion SPDR S&P 500 ETF Trust sold by State Street.