Vanguard Asset Management, a leading provider of index mutual funds and exchange-traded funds, has attracted new assets in all three quarters of the year thus far, solidifying their place as the world’s second largest ETF provider, behind iShares, a position they took from State Street Global Advisors (SSGA) at the start of the year.
Vanguard’s ETF division has continued to enjoy strong growth in 2015, widening the gap against State Street Global Advisors as the world’s second largest ETF provider.
Vanguard was predicted as early as September 2014 by London-based ETF consultancy firm ETFGI to overtake SSGA’s ETF arm. “Vanguard is very close to becoming the number two provider [globally]. It is a matter of months not years that will see Vanguard break ahead,” commented Deborah Fuhr, managing partner and co-founder of ETFGI.
At the time, data from ETFGI showed that excluding other exchange-traded products that make up the rankings, such as exchange traded notes and certificates, Vanguard was already the number two provider when just ETF assets were considered. The firm officially overtook SSGA as the 2nd largest ETP provider in January 2015.
The firm has used attractively low fees to maintain strong net asset inflows. Currently the firm’s average expense ratio is 0.18%. Other factors leading to the firm’s success included “the right product line-up”, “ability to address opportunities”, and the fact that Vanguard “is an asset manager pure and simple”, according to Fuhr.
Vanguard has also been able to replicate their business model in Europe, contributing to the firm’s global success. The US firm is currently the ninth-largest ETF and product provider in Europe. As of 30 September 2015, they had attracted $3.4bn in net new assets during 2015 alone.
BlackRock’s iShares is still the clear market leader in terms of total managed assets; at the end of Q3 the firm had $742bn across its entire range. Its lead has been maintained by strong growth in both Q1 and Q3 of this year, with nominal growth registered in Q2. Vanguard has followed similar growth this year while SSGA has registered outflows in all three quarters. The gap between the two providers has widened to over $50bn, with Vanguard’s AUM at $445bn compared to SSGA’s $390bn.
This indicates that retail and institutional clients may be switching from SSGA and moving their cash to competitors’ instead – a trend that does not bode well for the asset manager’s long term value.