Vanguard Lowers Fees Further, Average Expense Ratio Hits 0.06%

Vanguard Group has announced further fee reductions across its mutual funds and exchange-traded funds (ETFs). The asset manager is lowering costs for 84 share classes of mutual funds and ETFs, encompassing 53 total funds.

This action brings Vanguard's average asset-weighted expense ratio to 0.06%, a one basis point decrease from the previous year.

Commitment to Low Costs and Client Savings

This round of fee cuts aligns with Vanguard's historical strategy of offering low-cost index funds, a practice that has influenced the broader asset management industry.

Vanguard's chief executive officer, Salim Ramji, stated that these reductions reflect the firm's commitment to its clients, citing its investor-owned structure.

Vanguard estimates that its investors have saved approximately $600 million over the past two years due to these cost adjustments.

Unique Ownership Model and Industry Standing

Vanguard's unique ownership model, where fund shareholders elect board members who can direct excess revenue towards lowering costs, differentiates it from competitors.

Despite managing about $12 trillion in assets, Vanguard generates less fee revenue compared to some peers. For example, its U.S.-listed ETFs generated approximately $1.5 billion in fee revenue last year, trailing BlackRock's $5.4 billion from a slightly larger ETF lineup.

Expansion into Active Management

The continued reduction in average fees occurs even as Vanguard expands into actively managed funds, which typically have higher expense ratios.

The firm introduced its first traditional stock-picking ETFs last year, including the Vanguard Wellington Dividend Growth Active ETF (VDIG), which carries a 0.40% fee.