Thursday, Dec 8, 2022
International Finance
Asset Management

Vanguard unleashes new UK asset management price war with fee cuts

Vanguard starts new price war in UK asset management
The US asset manager cut the fees across its $215 mn UK domiciled active fund range

The $5.6 trillion US asset manager Vanguard has cut the fees of its active UK fund range, challenging UK-based asset management companies. Vanguard had triggered a price war in the UK when it introduced passive investment products to the UK nine years ago.

Vanguard has approximately $1 trillion of its assets in active funds. Five of the funds are on sale in the UK and the asset management company has slashed the fees of four of them. The asset manager cut the fees across its $215 million UK domiciled active fund range to mark the third anniversary of their launch.

The US asset management company cut the annual charge on Vanguard Global Equity, Vanguard Global Equity Income, and Vanguard Global Balanced funds from 0.6 percent to 0.48 percent. It also lowered the cost of the Vanguard Global Emerging Markets fund to 0.78 percent from 0.80 percent.

UK fund managers are going through the most challenging period of fundraising since the global financial crisis of 2018. Aggressive price reduction has helped Vanguard become the second largest asset manager in the world with $5.6 trillion in assets.

Vanguards staple business is low-cost passive index funds that broadly track market benchmarks. It has brought the aggressive price cut based competition from the US to the UK since 2019 and has now created a European asset base of $170 billion.

The typical management fee for active funds in the UK is 1 percent. Vanguard launched UK domiciled active products in 2016. Its global equity funds have garnered assets worth £43.4m while its global credit bond funds have garnered assets worth £50.6 million.

Vanguard’s UK asset management competitor M&G, owned by insurer Prudential, has also introduced a simplified fee structure for its UK funds. M&G had also announced plans to charge a single annual fee. M&G also plans to provide discounts that will rise as assets when M&G’s UK funds clear key milestones.

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