Vanguard holds its fire in index fund fee war.

Publication: Europe Intelligence Wire

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COPYRIGHT 2004 Financial Times Ltd.

(From Funds International)

The Vanguard Group has always prided itself on its low-cost status on fees and expenses of its managed index funds. However fierce competition in the marketplace means that several rivals look set to undercut Vanguard when it comes to fees Fees and other less visible costs are the worst enemies of any long- term mutual fund investor's returns. This has been the battle cry of Vanguard Group, the US' second largest fund management firm with 15 million accounts and $550 billion assets under management, since its founding by John C Bogle in 1975.

Vanguard's success has been built on its early pioneering development of index funds, which make up some 55 percent of its total assets, and low management fees. For years it has remained the undisputed low-cost leader as borne out by independent studies. According to fund tracker Lipper the average operating expense ratio of Vanguard funds of 0.25 percent ($2.50 for every $1,000 invested) in 2003 was the lowest of any family of retail mutual funds. Vanguard's cost ratio compared with the US mutual fund industry's average of 1.38 percent ($13.80 per $1,000).

Vanguard under attack But Vanguard's lowest-cost status has come under attack with the recent...

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