Vanguard is cutting the fees on six of its core equity ETFs from 7 October – good news for existing investors – but it is worth shopping around before committing to a fund to see if you can get lower investment costs elsewhere.
The fee reductions impact six funds spanning global, North American, European, Japanese and emerging market equities. Earlier this year, Vanguard also cut the fees on seven of its fixed income ETFs.
“This latest round of equity fund fee cuts will help investors keep more of their returns,” said Jon Cleborne, head of Vanguard Europe. “It’s part of our ongoing mission to lower the cost and complexity of investing – helping to make money for investors, not from them.”
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ETF | Previous ongoing charges figure | New ongoing charges figure |
Vanguard FTSE Emerging Markets UCITS ETF | Unhedged: 0.22% | Unhedged: 0.17% |
Vanguard ESG Emerging Markets All Cap UCITS ETF | Unhedged: 0.24% | Unhedged: 0.19% |
Vanguard FTSE Japan UCITS ETF | Unhedged: 0.15% Hedged: 0.20% | Unhedged: 0.10% Hedged: 0.15% |
Vanguard Germany All Cap UCITS ETF | Unhedged: 0.10% Hedged: 0.15% | Unhedged: 0.07% Hedged: 0.12% |
Vanguard FTSE All-World UCITS ETF | Unhedged: 0.22% Hedged: 0.27% | Unhedged: 0.19% Hedged: 0.24% |
Vanguard FTSE North America UCITS ETF | Unhedged: 0.10% Hedged: 0.15% | Unhedged: 0.08% Hedged: 0.13% |
Can you find cheaper funds elsewhere?
The average cost of an equity ETF in Europe on an asset-weighted basis is 0.2%, according to Morningstar data cited in the Financial Times.
Almost all of the new fees unveiled by Vanguard today are cheaper than this – perhaps unsurprising given the provider is well known for its low-cost funds.
Despite this, a quick online comparison exercise shows some competitors offer similar funds at a similar (or lower) price point, which could be worth a look.
Global ETFs
If you are thinking about investing in Vanguard’s FTSE All-World ETF, it is worth comparing it with HSBC’s competitor product.
The Vanguard fund has an ongoing charge figure (OCF) of 0.19% or 0.24% depending on whether you opt for the hedged or unhedged share class. HSBC charges 0.13%.
Emerging market ETFs
Those considering the Vanguard FTSE Emerging Markets UCITS ETF may want to have a look at a similar product from Franklin Templeton. It tracks the same index with a lower ongoing charge of 0.11%.
Vanguard also offers an ESG option, which could be a good pick. In a quick search exercise, we did not uncover cheaper alternatives.
US ETFs
Other than Vanguard's fund, it is difficult to find an ETF that tracks the FTSE North America index, but investors could consider a different US benchmark, depending on how specific their requirements are. The S&P 500 is a popular example.
The FTSE North America tracks large and mid-cap stocks whereas the S&P 500 is large cap only, but there is a fair amount of overlap. The top 10 holdings across both indices are almost identical currently.
Vanguard offers a S&P 500 tracker – the S&P 500 UCITS ETF – which comes with the slightly lower fee of 0.07%. Invesco charges 0.05% for a similar product.
Single country ETFs
Vanguard’s German ETF seems to be a fairly unique offering with few direct competitors. At just 0.07%, the fee is low.
For comparison, BlackRock offers a large-cap German ETF (different to Vanguard’s fund which gives all-cap exposure), but this comes with a more expensive fee of 0.16%.
While Vanguard’s Japanese ETF is also a low-cost option, a similar product from Franklin Templeton is slightly cheaper with an ongoing charge of 0.09% (unhedged), versus Vanguard’s 0.10%.
Fund cost isn’t everything
Investors should remember that fund fees aren’t everything – you need to consider your investment experience in the round. Platform fees, investment choice and customer service are also important.
The amount of money you have invested is also a factor, particularly when weighing up platform fees and whether a flat or percentage fee offers better value.
In February, Vanguard warned small investors that its service “may no longer be right” for them after introducing a £4 minimum monthly platform fee, having previously charged just 0.15% per year.
The changes impact those with less than £32,000 in their ISA, SIPP or general investment account.
It means someone with £1,000 in their account will now pay £48 per year in account fees, up from £1.50 previously – equivalent to 4.8%. The platform said the change was “necessary to help cover the rising cost of serving our clients”.
Those with more in their account continue to pay 0.15% per year, as do those who invest through Vanguard’s managed service offering, meaning the platform may still offer good value for these groups.
It is worth noting that you do not need to invest through Vanguard’s platform to access its funds. Many of the funds we have highlighted today are available through a number of providers.
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