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Vanguard enters UK retail market with low cost fund range

by Drazen Jorgic on Jun 17, 2009 at 11:09

US group Vanguard Investments will launch an 11-strong range of passive funds into the UK retail market next week, providing investors with exposure to all the major geographic regions at a low cost.

Five of the range will be domiciled in the UK with the remaining six domiciled in Dublin. They will be available to UK investors across a host of advisory and retail platforms.

Vanguard said the new funds - which will cover most of the world's geographic regions and the UK - were designed to offer  building blocks for a diversified equity and bond portfolio by enabling UK investors and their advisers to allocate across global markets as desired.

Tom Rampulla, managing director of Vanguard Investments UK, said that the asset manager will continue focusing on costs.

He said:'Vanguard’s index funds offer investors broadly diversified exposure to equity and fixed income markets, at  very low cost. Costs matter, as each pound of cost is a pound taken out of your investment. We are confident that these funds have among the lowest total expense ratios in their peer groups.'

The fee structure of the funds is set to range from 0.15% on Vanguard's UK Government Bond Index fund to 0.55% on Vanguard's most expensive Emerging Markets Stock Index fund. Most of its equity funds will charge between 20 and 30 basis points.

Rampulla said that Vanguard will be focusing mainly on the IFA community, which is moving away from commission to fee-based systems. He said it will also be working with wealth managers and family offices.

2 comments so far. Why not have your say?

John Blackmore

Jun 17, 2009 at 12:41

0.55% + 0.5% for the adviser should prove a benefit to clients and will hopefully shake up the market. Have to wonder though how many clients will end up with 0.55% + platform fee of 0.5% and adviser fee of 1% + ?

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Phil Ham

Jun 17, 2009 at 13:01

Charges on the platforms preferred by fee-based advisers could typically come in at 20 to 30 bps.

Using platforms with these type of funds results in an overall charge to the client of around 1.3% when factoring in a half percent adviser fee - considerably less than the 2% TERs levied by most traditional providers, with hugely increased functionality to boot.

Adopting platforms, alongside reasonably priced funds and realistic ongoing adviser remuneration, represents the an excellent value proposition for most clients.

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