Vanguard beats its rivals on revenue generated from fees, despite its long reputation for low fees on mutual funds and ETFs, according to Morningstar.
While Vanguard has the lowest average management fee among the industry's top 11 asset managers by fee share, its "hugeness," with $8.7 trillion in assets under management at Dec. 31, "enables it to vacuum up the largest share of the industry’s management-fee revenue at 13%," an analysis by a Morningstar team found.
Capital Group's American Funds were second last year, with 9%, and Fidelity was third, at 8%, the research firm found. The same three firms led the industry, in that order, in 2018.
Vanguard recently announced its largest ever fee cuts, lowering expenses for 87 funds by about one basis point on average.
"It’s hard to say if Vanguard’s recent fee cuts will affect its management-fee share in the future because other factors, such as fund flows, market performance, and whether rivals respond to Vanguard’s cuts with their own, influence the equation. If Vanguard, however, had made the same cuts in 2024, an up year for the markets and flows, it still would have come out on top with a management-fee share of 12.7%," the analysts wrote.
The largest 11 firms accounted for 57% of the industy's fees in 2014, according to Morningstar.
Vanguard charges a 0.13% asset-weighted management fee, the lowest among the 11 largest firms by management fee share, Morningstar found. BlackRock iShares was second at 0.18%, followed by Dimensional at 0.22%.
"As passive funds have taken share from active ones and investors have sought cheaper options, Vanguard is winning. Its management-fee share increase beats its largest U.S. competitors, growing by nearly 4 percentage points since 2018. For similar reasons, BlackRock/iShares and Fidelity Investments also gained, but by less than 1 percentage point," Morningstar said. "So far, firms focused on offering low-cost funds and ETFs are winning, and so are investors."
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