Strong bond returns prompt Vanguard fee cut

vanguard ETFs blackrock fees

11 April 2023
| By Laura Dew |
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Vanguard has cut fees on its $1.5 billion Australian Fixed Interest Index ETF from 0.15 per cent to 0.10 per cent per annum.

The firm said it had gradually reduced management fees on diversified funds and exchange-traded funds (ETFs) as they grew in scale and popularity. 

During 2022, flows into its Australian fixed income ETFs had been $2.7 billion, compared to $1.6 billion in 2021.

Vanguard Asia Pacific head of capital markets, Minh Tieu, said: “Keeping costs low has been an important way that Vanguard has helped investors achieve financial goals, and we continue to deliver this benefit to our investors globally.

“Our products undergo periodic reviews as part of our ongoing commitment to deliver low-cost, high-quality products that are best in class, and we continue to refine our product offers in line with this goal. This robust review process includes a pricing review of our funds with the aim of passing on any savings to investors where possible.”

Vanguard said it expects domestic bond ETFs to return to 3.7 per cent to 4.7 per cent over the next decade, a 2 percentage point increase from a year ago thanks to inflation and interest rate hikes. 

The past quarter had delivered the biggest quarterly return for bonds in over a decade, as the Bloomberg AusBond composite index posted a 4.6 per cent total return for Q1 2023.

Tieu said: “Last year’s repricing of inflation and interest rates — and consequent lower bond prices now — mean that bonds should be firmly back on investors’ radars.

“That bond markets are typically forward-looking, and consequently may already be pricing in expectations of future inflation and interest rate hikes, only further adds to their appeal. This means that the cost of diversification is now cheaper than ever, with income and possible capital gains on top.”

The announcement followed one by iShares that it had cut fees on its iShares Core Composite Bond ETF by 5 basis points to 0.1 per cent. 

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Fund name
Ardea Diversified Bond F
144.00 3 y p.a(%)
Hills International
63.39 3 y p.a(%)