Fund manager Vanguard continues to lower the cost of investing in Australia, announcing reductions to the management expense ratios (MERs) on five of its funds.
This round of MER reductions applies to three wholesale managed funds and two exchange-traded funds (ETFs), continuing Vanguard’s long track record of reducing costs for investors as its funds benefit from economies of scale.
Providing low-cost, high quality managed funds that let investors keep more of their returns is the central tenet of Vanguard globally, and a recent review of its suite of Australian products concluded with MER reductions on the following funds:
| MER as at 30 September | MER from 1 October | MER reduction | |
| Vanguard Australian Shares High Yield Fund | 0.40% p.a. | 0.38% p.a. | 0.02% |
| Vanguard Australian Property Securities Index Fund | 0.24% p.a. | 0.23% p.a. | 0.01% |
| Vanguard International Credit Securities Index Fund (Hedged) | 0.34% p.a. | 0.32% p.a. | 0.02% |
| Vanguard Australian Property Securities Index ETF (ASX: VAP) | 0.25% p.a. | 0.23% p.a. | 0.02% |
| Vanguard Australian Shares Index ETF (ASX: VAS) | 0.15% p.a. | 0.14% p.a. | 0.01% |
Vanguard is the fastest growing fund manager in Australia, growing by 25.9 per cent over the past 12 months (Rainmaker data to 30 June 2016). Passing on the benefits of increasing scale is one of the main methods Vanguard uses to drive down investing costs for its clients.
Over 20 years of operating, Vanguard Australia has previously delivered 17 individual fund MER reductions to clients.
Vanguard Australia Head of Product, Evan Reedman, said the organisation regularly assessed whether it had the capacity to reduce MERs for its funds.
“This idea of delivering further value to our clients by lowering the cost of investing started with our mutual structure in the US, and today is at the heart of how we operate in Australia and other regions around the globe,” Mr Reedman said.
“For Vanguard, low-cost isn’t a marketing strategy that we apply to select funds. It is in our DNA, it is how we do business. Some people may look at these reductions and question how one or two basis points off already low expense ratios can possibly have an impact. But every basis point in costs counts, and over the long-term, the compounding benefits of these lower costs can meaningfully improve outcomes for investors.
“We absolutely believe in the power low-cost investing has in letting investors keep more of their returns. It’s about recognising that when it comes to investing, often you get what you don’t pay for.
“As we continue our mission of lowering costs, we will regularly look for ways to be more efficient as we deliver high- quality investment solutions to our clients.”
Lower MERs for these five funds are effective from 1 October 2016.
