Media Releases
- Exchange Traded Funds: dispelling the myths and misconceptions
  
  Exchange Traded Funds (ETFs) offer investors a simple, transparent and diversified investment solution.
- Emerging markets returns not all about high economic growth
  
  Investors have been cautioned about overly optimistic expectations for investment returns from emerging markets.
- Australia to lead the world says new Vanguard head
  
  Proposed reforms to the Australian financial services industry will position Australia as one of the leading financial service markets in the world in terms of low cost and transparency, according to Vanguard Investments Australia's new managing director, Mr. John James.
- U-shaped recovery offers tried and true opportunities for patient investors, says Vanguard Chief Economist
  
  The global economy will be self-sustaining in the wake of the global economic crisis, despite some near-term risks and secular US concerns such as the jobless rate and high debt, according to Vanguard's US-based Chief Economist, Joe Davis.
- John James named Head of Vanguard Investments Australia
  
  Vanguard Investments Australia has announced that John James has been appointed as Managing Director, effective 1 May.

News & Commentary

The growing majority of cost-conscious investors 31 May 10

Australian investors are likely to place an increasingly high priority on keeping funds management costs to a minimum.

This is largely reflecting the widening recognition that high fees can significantly reduce an investor’s long-term returns.

Among other factors is that when long-term returns are more subdued and short-term markets are more volatile, investors tend to focus more on fees when selecting managed funds.

Fascinatingly, a study published this month by Vanguard in the US – Costs Matter: Are Investors Voting With Their Feet? – measures the popularity of lower-cost funds among American investors.

Vanguard examined Morningstar fund research data showing the net inflow into equity and bond funds over the 10 years to December 2009. The study included, of course, a close examination of the inflows into low-cost Exchange Traded Funds (ETFs) and conventional index funds as well as into actively managed funds.

In short, the study found that funds with lower-expense ratios received the “lion’s share of investor dollars over the period”, write its authors Francis Kinniry, Donald Bennyhoff and Yan Zilbering.

“… many investors are likely recognising that lower costs help them to keep more of a fund’s returns – [and] have been ‘voting with their feet’ and gravitating to low-cost investment options,” the authors conclude.

The study’s key findings include:

Equity funds in the lowest expense quartile had a net asset inflow of almost $US395 billion over the decade – representing 86% o the net asset inflows to equity funds in the quartiles with net positive inflows.
Equity funds in the top two quartiles in terms of expenses suffered net cash outflows of $81 billion.
ETFs and conventional index funds captured 80% o the net inflow to equity funds tagged the “lowest of the low” in fee terms.

This Vanguard study carries other crucial revelations regarding low-cost funds which Smart Investing will discuss in coming weeks.

* Written by Robin Bowerman, Head of Retail at Vanguard Investments Australia.
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