Vanguard Reports First Wave Of 2016 Expense Ratio Changes

VALLEY FORGE, PA (DECEMBER 22, 2016)- Vanguard clients saved an estimated $13 million based on total assets and lower expense ratios on 35 individual mutual fund shares, including 11 exchange-traded fund shares (ETFS).*

These changes represent the first wave of Vanguard funds with a fiscal-year-end date in 2016 to report expense ratio changes (in this instance, funds with a fiscal year that ends in August). Vanguard will announce any additional expense ratio changes as funds update their prospectuses in the coming months. Expense ratios are reported on an annual basis and are based on actual operating expenses for the prior fiscal year.

“While some will portray Vanguard’s expense ratio reductions as another volley fired in the fee war, we view it as business as usual. We’ve been lowering the cost of investing for four decades and will continue to do so,” said Vanguard CEO Bill McNabb. “Importantly, we have announced reductions across our product offerings—mutual fund and ETF, index and active, stock and bond, domestic and international.”

Vanguard’s expense ratio reductions are in part a result of the continued growth of the funds via market appreciation, as well as strong cash inflows. The firm reported expense ratio reductions for the 12 months ended August 2016 for a range of fund share classes (Investor, Admiral, ETF, Institutional, and Institutional Plus) in five fund categories, as summarized below:

- Bond index. Twenty-four Vanguard bond index fund shares reported lower expense ratios. For example, the $18.7 billion Vanguard Short-Term Corporate Bond Index Fund reported the following reductions: Admiral Shares, 3 basis points to 0.07%; ETF Shares, 3 basis points to 0.07%; and Institutional Shares, 2 basis points to 0.05%. A basis point is one-hundredth of 1%.

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Size/style equity index. Four size/style index fund shares that seek to track CRSP benchmarks reported lower expense ratios. The largest of these funds, the $2.3 billion Vanguard Mega Cap Growth Index Fund, reported that the expense ratios of its Institutional Shares and ETF Shares declined by 2 basis points, to 0.06% and 0.07%, respectively.

- Social index. Two social index fund shares reported lower expense ratios. The $2.4 billion Vanguard FTSE Social Index Fund reported that the expense ratio of its Investor Shares fell 3 basis points, to 0.22%, while that of its Institutional Shares fell 3 basis points, to 0.12%.

Actively managed domestic equity. Three actively managed domestic fund shares reported lower expense ratios. The largest of these funds, the $6.6 billion Vanguard U.S. Growth Fund, reported that the expense ratios of its Investor and Admiral shares declined by 1 basis points to 0.46% and 0.33%, respectively.

- Actively managed international equity. Two actively managed international fund shares reported a lower expense ratio. The $21.5 billion Vanguard International Growth Fund, reported that the expense ratios of its Investor Shares and Admiral Shares declined by 1 basis point to 0.46% and 0.32%, respectively.

The accompanying factsheet provides a complete list of the fund and ETF shares reporting expense ratio changes.  

During the 2015 fiscal year, about $225 million in aggregate savings was passed on to Vanguard clients from expense ratio reductions for more than 200 fund shares.

Two funds report increases

Admiral Shares of the $2.1 billion Vanguard Consumer Discretionary Index Fund and ETF Shares of the $6.2 billion Vanguard Health Care Index Fund each reported increases of 1 basis point, from 0.09% to 0.10%, for the fiscal year ended August, 2016.

A history of lowering expenses

Vanguard has a long history of lowering investor costs. In 1975, when Vanguard managed $1.8 billion in U.S. fund assets, the average expense ratio for the Vanguard funds was 0.89%. Today, Vanguard manages $3.6 trillion in U.S. fund assets and the average expense ratio is 0.18%, or less than one-fifth that of the 1.01% industry average. (On an asset-weighted basis, the average expense ratio is even lower—0.12%, compared to 0.55% for the industry).

In 2004, when Vanguard managed $6 billion in ETF assets, the average expense ratio for Vanguard’s ETFs was 0.22%. Today, Vanguard manages $593 billion in U.S. ETF assets. The average expense ratio of the firm’s ETFs is 0.12%, or less than one-third that of the 0.53% industry average. (On an asset-weighted basis, Vanguard’s average expense ratio is even lower at 0.10%).**

About Vanguard

Vanguard is one of the world’s largest investment management companies. As of November 30, 2016, Vanguard managed more than $3.8 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers more than 350 funds to its more than 20 million investors worldwide. For more information, visit vanguard.com. 

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*Estimated savings for the identified funds is the difference between prior and current expense ratios multiplied by average AUM. Average AUM is based on daily average assets during a month, which are then averaged over the 12-months of the fiscal year ending August 31, 2016.

**Source: Vanguard and Lipper, a Thomson Reuters Company, as of December 31, 2015.

All asset figures are as of November 30, 2016, unless otherwise stated.

For more information about Vanguard funds and ETFs, visit vanguard.com or call 800-662-7447 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

Past performance is no guarantee of future results.

All investments are subject to risk, including the possible loss of the money you invest.

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