Vanguard signage outside the company's campus in Paoli, Pennsylvania, US, on Tuesday, Oct. 8, 2024. Photo: Hannah Beier/Bloomberg
On Monday, asset manager Vanguard made a major announcement, slashing the fees on nearly half of its U.S. funds, expecting to save investors more than $350 million in 2025. The initiative is the largest annual expense ratio reduction in Vanguard’s nearly 50-year history – and the first major announcement from Salim Ramji, who became Vanguard CEO six months ago.
Effective February 1, 2025, the firm reduced fees on 168 share classes across 87 funds by 0.02% to 0.06%, which represents one fourth of the $9.2 trillion in Vanguard’s mutual funds, exchange-traded funds and money market funds. Some of the largest Vanguard funds include the Total Bond Market Index Fund, Treasury Money Market Fund and Tax-Exempt Bond ETF.
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The fee cuts come just weeks after Vanguard agreed to pay $106 million to settle charges from the Securities and Exchange Commission related to misleading target date fund statements and months after the company paid $40 million to settle a class action lawsuit brought by investors who accused the asset manager of a breach of fiduciary duties over target date funds.
Additionally, Vanguard’s patent on the ETF share class of its mutual funds expired in 2023, and 30 companies have asked the Securities and Exchange Commission for permission to add their own ETF share classes to existing funds.
Related: Vanguard to pay SEC $106M to settle violations over ‘misleading’ target date fund statements
“This fee cut speaks to what our founder Jack Bogle set out to do, which is create an investment company that was designed for one constituency and that’s our investors," said Ramji. "Bogle had a great phrase, ‘You get what you don’t pay for.’ There’s a false dichotomy, ‘Do you want great performance, high quality or do you want low costs?’ At Vanguard you can get both. This is over $350 million of estimated savings the largest expense cut in our history since 1975 we’ve actually reduced our expense ratios more than 2000 times.”
The fee-cutting strategy has made the Malvern, Pennsylvania firm, which marks its 50th anniversary on May 1, the world’s second-largest money manager, even though it offers far fewer products than larger rival BlackRock.
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
