Vanguard Announces Share Splits for 3 Passive ETFs

What You Need to Know

The announcement comes a day after rival BlackRock announced ETF share splits and fee cuts.
ETF share splits are a way that asset managers can compete on price given their already low fees for passive ETFs.
The splits will help financial advisors using models construct low-cost diversified portfolios.

A day after BlackRock announced share splits for nine iShares ETFs, along with other changes, Vanguard announced share splits for three passive ETFs linked to Russell equity indexes.

The Vanguard Russell 1000 Value ETF (VONV) and Vanguard Russell 2000 ETF (VTWO) will be split 2:1, and the Vanguard Russell 100 Growth ETF (VONG) will be split 4:1 as of the start of trading on April 20. The splits will apply to all shareholders of record in any of the ETFs as the close of trading on April 19.

“Vanguard is employing ETF share splits to keep share prices within efficient and accessible trading ranges, which benefits investors with ETF-centric portfolios by reducing uninvested cash in client accounts,” said Kaitlyn Caughlin, head of the Vanguard Portfolio Review Department, in a statement.

Share prices for the three passive Vanguard ETFs currently range from a low of about $131 for VONV to a high of around $250 for VONG, as of midday trading on Tuesday.

The lower prices that will result from the share splits will help financial advisors using Vanguard ETFs through Vanguard-managed or third-party models construct low-cost, broadly diversified portfolios for their clients, according to the Vanguard statement.

“Lower share prices enhance the functionality and utility of these ETFs within these models, particularly when rebalancing client portfolios,” Vanguard says.

New Trend in ETF Price War

On Monday, BlackRock’s iShares announced share splits for nine ETFs ranging from two-to-one to six-to-one along with changes in the ETFs’ indexes and huge fee cuts.

ETF share splits are a way that asset managers can compete against each other given their already low fees for passive ETFs.

Todd Rosenbluth, head of ETF & mutual fund research at CFRA Research, said share splits among ETFs are “definitely a trend. Like Apple, ETFs that have appreciated in value over time have triple-digit share prices [and] as they are increasingly used by advisors to build asset allocation strategies; such high levels can limit their appeal compared to ones where round lot shares can more easily be purchased.”

Rosenbluth noted that an ETF share price, like its expense ratio, “is one aspect that the asset manager can control in hopes of attracting more assets.” He added, however, that “share price matters much less than the securities inside in driving future performance.”

Rosenbluth expects there will be more share split splits for index-based ETFs ahead “now that asset managers have gained comfort in doing so.”