What do you make of Vanguard’s actively managed moves?

What do you make of Vanguard’s actively managed moves?

ETFs are often associated with index investing, but they can also be actively managed.  Vanguard Canada knows this well.  Add in the fact that the Vanguard Group is striving for more market share, in Canada and within other markets, and you’ve got some great incentive for Vanguard Canada launching four actively managed funds in the coming months.

You can find a list of Vanguard Canada’s existing actively managed ETFs here.

You can find a press release about their upcoming actively managed mutual funds here.

While their current menu of factor-based ETFs in Canada is offered at a relatively low cost (I recall the MER is about 0.40%), ironically, the upcoming actively managed Vanguard funds are expected to cost more in money management fees, for the F-series anyhow.  (F-series of funds are a class available to investors who have fee-based arrangements with their advisors.  An investor in a fee-based series typically negotiates the rate of their advisor’s fee, directly to, the advisor.)   With these funds there are generally no trailing commissions on a fee-based series because the advisor is being compensated based on the rate negotiated with the investor. This is good because high fund fees and trailing commissions should go away albeit that his happening with much kicking and screaming.

With no trailing commissions F-series funds have generally lower management fee than a retail series.

It is at this point that I should highlight Vanguard has long since established a unique operating structure that benefits investors:  the company is owned by the funds and ETFs themselves and therefore, in turn, Vanguard clients.  This structure provides an incentive to keep money management fees low or at very least, cost-leaders in the financial industry.

Why mutual funds?

My hunch is with an aging population in Canada, our historical bias to mutual fund investing in general, and based on a demand for these products by their sub-advisor partners, Vanguard Canada is banking on active management to grow their assets under management – plain and simple.

My thoughts?

I own a couple of Vanguard ETFs myself but none that are domiciled in Canada.  I only own U.S-listed ETFs at this time.  My fees to own such products are 0.08% and 0.11% respectively, which is far lower than most mutual funds or even ETFs will ever charge investors – only a few exceptions exist on that.

I have no intention of buying these new Vanguard mutual funds because my existing costs are low and I own thousands of stocks from around the world based on the funds I own. I will however remain interested (as always) in how successful such funds might be, what the comparables to them are, and just as importantly why investors have decided to pour money into them over time.

What do you make of Vanguard’s actively-managed-money-moves?  Do you own any Vanguard financial products?

Mark Seed is the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've grown our portfolio to over $500,000 - but there's more work to do! Our next big goal is to own a $1 million investment portfolio for an early retirement. Subscribe and join the journey!

13 Responses to "What do you make of Vanguard’s actively managed moves?"

  1. Probably a very smart move for them. The market for these MF’s in Canada is huge and no doubt Vanguard will be very cost competitive and they have a sterling record in the US.

    I also hold 2 Vanguard US listed ETFs at this time with MERs of .04 & .11
    Very satisfied with these and won’t be surprised if costs continue to go down.

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    1. They absolutely have a great financial brand to rely on; as low-cost leaders so they can likely “get away” with charging more for their actively managed ETFs and mutual funds.

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  2. It all comes down to results and cost. Results will likely go up and down like any investment at higher costs. Hard to beat the market year after year. I still like the consistent blue chip dividends I get that generally go up, at a very low one time fee at purchase time. Value, over time, also generally goes up. My age dictates my strategy.

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  3. Vanguard is a champion in the ETF space when it comes down to getting the most by paying the least.
    Recently, the BMO ETF products has fascinated me, as it offers more with their products that Vanguard does not (at least not in Canda). The fees are a bit expensive when compared to Vanguard, but the product list options that BMO provides is quite something.

    Reply

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