News release

Vanguard Investors Benefit From Expense Ratio Reductions of World's Largest Stock, Bond Funds

Total savings from expense ratio reductions in fiscal year 2015 amount to about $215 million

VALLEY FORGE, PA (April 27, 2016)—Vanguard investors saved $71 million as a result of lower expense ratios reported for 73 shares classes offered by a variety of Vanguard mutual funds,* including the two largest bond funds and the two largest stock funds in the world.**  In all, Vanguard has passed on aggregate savings resulting from expense ratio reductions in fiscal year 2015 of about $215 million to Vanguard clients in more than 200 fund shares.***

The world’s two largest bond funds and two largest stock funds, and the reductions made to their expense ratios, are:

  • Vanguard Total Bond Market Index Fund. The world’s largest bond fund, with $158 billion in assets under management, reported that the expense ratio for Investor Shares was reduced by four basis points, to 0.16%; for Admiral Shares, by one basis point, to 0.06%; for ETF Shares, by one basis point, to 0.06%; for Institutional Shares, by one basis point, to 0.05%; and for Institutional Plus Shares, by one basis point, to 0.04%.
  • Vanguard Total Bond Index II Fund. The world’s second-largest bond fund, with $96.3 billion in assets under management, reported that the expense ratio for Investor Shares was reduced by one basis point, to 0.09%; for Institutional Shares, the expense ratio was reduced by three basis points, to 0.02%.
  • Vanguard Total Stock Market Index Fund. The world’s largest stock fund, with $418 billion in assets under management, reported an expense ratio reduction for Investor Shares of one basis point, to 0.16%. 
  • Vanguard 500 Index Fund. The industry’s oldest stock index fund and the world’s second-largest stock fund, with $227.5 billion in assets under management, reported an expense ratio reduction for Investor Shares of one basis point, to 0.16%.

“It’s a virtuous circle; investors continue to entrust us with their assets and we continue to pass along savings in the form of lower fees, while at the same time investing to improve the quality and breadth of our services,” said Vanguard CEO Bill McNabb.

Mr. McNabb noted that Vanguard clients pay an average asset weighted expense ratio (the average shareholders actually pay) of 0.13%, which is five basis points below the firm’s average expense ratio of 0.18%.****  “Vanguard clients are extremely cost conscious, recognizing the importance of low costs to their ultimate investment success,” he said. “Industry and company data show that investors are not only directing their investments to the industry’s low-cost leader*****, but also gravitating to our ultra-low-cost Admiral and ETF Shares.”

Ultra-low-cost Admiral and ETF shares grow in popularity

Seventeen Admiral Shares and fourteen ETF Shares also reported expense ratio reductions. Vanguard introduced Admiral Shares in November 2000 to recognize and encourage the cost savings associated with large and long-tenured accounts by passing along these savings to shareholders in the form of lower expense ratios. In October 2010, Vanguard lowered the minimum investment requirements for most individuals to qualify for Admiral Shares to $10,000 from $100,000 for broad-market index funds and to $50,000 from $100,000 for actively managed funds. (Tenure requirements were also eliminated.) As of today, 89 funds, including 51 index funds and 38 actively managed funds, offer Admiral Shares. Together, these shares represent total assets of $1.2 trillion—more than a third of Vanguard U.S. mutual fund assets.

Vanguard ETF Shares were introduced in 2001. They feature low expense ratios, but do not require a minimum investment. As of today, 70 index funds offer ETF Shares, with total assets of $506.7 billion.

Helping financial advisors achieve a desired tilt

Expense ratio reductions announced for Vanguard ETFs are of particular interest to financial advisors who use low-cost ETFs to build cost-efficient client portfolios.

Advisors looking to tilt client portfolios toward a particular duration will welcome the reductions reported for three duration-specific bond ETFs: the $18.6 billion Vanguard Short-Term Bond Index ETF (Ticker: BSV), the $8.5 billion Vanguard Intermediate-Term Bond Index ETF (Ticker: BIV), and the $2 billion Vanguard Long-Term Bond Index ETF (Ticker: BLV). Each saw their expense ratio drop one basis point, to 0.09%.

Ten stock ETFs reported declines in their expense ratios, benefiting advisors looking to tilt client portfolios by size and style. For example, reductions were reported for the $20 billion Vanguard Growth ETF (Ticker: VUG), the $19.8 billion Vanguard Value ETF (Ticker: VTV), the $13.6 billion Vanguard Mid-Cap Fund ETF (Ticker: VO), and the $11.8 billion Vanguard Small Cap ETF (Ticker: VB). Each saw their expense ratio drop one basis point to 0.08%.

Reductions span share classes, fund categories

The expense ratio reductions span five fund share classes (Investor, Admiral, ETF, Institutional, and Institutional Plus) across five fund categories: Domestic stock index, domestic bond index, balanced index, managed payout, and tax-managed.

The accompanying fact sheet provides a complete list of the fund and ETF shares reporting expense ratio changes. These expense ratios are reported on an annual basis in the funds’ prospectuses and represent actual operating expenses for the prior fiscal year, as per Securities and Exchange Commission requirements.

About Vanguard

Vanguard is one of the world’s largest investment management companies. As of March 31, 2016, Vanguard managed more than $3.4 trillion in global assets. The firm, headquartered in Valley Forge, Pennsylvania, offers more than 345 funds to its more than 20 million investors worldwide. For more information, visit vanguard.com.

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*Vanguard calculation based on average fund assets over a 12-month period and the change in expense ratios through fiscal year December 2015.

**Source: Morningstar

***Vanguard calculation based on average fund assets over a 12-month period and the change in expense ratios through fiscal year August 2015, September 2015, October 2015, November 2015, and December 2015.

****Source: Lipper and Vanguard

***** Vanguard average expense ratio: 0.18%. Industry average expense ratio: 1.01%. Sources: Vanguard and Lipper, a Thomson Reuters Company, as of December 31, 2015.

 
All asset figures are as of March 31, 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.

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

Vanguard ETFs are protected by U.S. Patent Nos. 6,879,964; 7,337,138; 7,720,749; 7,925,573; 8,090,646; and 8,417,623.

Vanguard Marketing Corporation, Distributor.