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Vanguard has engaged in a further round of expense-reductions across a broad range of its US-listed funds, including the lowering of fees for nine equity ETFs and three bond ETFs.

Noting that broad market equity and bond exposures can be obtained for 10 basis points or less through ETFs, Vanguard CEO Bill McNabb, said: “While Vanguard is lowering — and will continue to lower — the cost of investing, the so-called fee war is essentially over on the beta battleground… Investors have won. The new fronts in the fee war are active management and advice. Again, investors will ultimately win.”

Part of the fee reductions are being applied to some of the industry’s largest international ETFs including five that are the largest in their category (VWO, VGK, VPL, VT, and BNDX) and two that are the second largest in their category (VNQI and VSS), according to Morningstar data as of 31 December 2016. These reductions are as follows:

The Vanguard FTSE Emerging Markets ETF (VWO) declined one basis point to 0.14%.

declined one basis point to 0.14%. The Vanguard FTSE Europe ETF (VGK) declined two basis points to 0.10%.

declined two basis points to 0.10%. The Vanguard FTSE Pacific ETF (VPL) declined two basis points to 0.10%.

declined two basis points to 0.10%. The Vanguard Total World Stock ETF (VT) declined three basis points to 0.11%.

declined three basis points to 0.11%. The Vanguard Total International Bond ETF (BNDX) declined three basis points to 0.12%.

declined three basis points to 0.12%. The Vanguard Global ex-US Real Estate ETF (VNQI) declined three basis points to 0.15%.

declined three basis points to 0.15%. The Vanguard FTSE All-World ex-US Small-Cap ETF (VSS) declined four basis points to 0.13%.

In addition, Vanguard’s relatively new municipal bond index ETF, the Vanguard Tax-Exempt Bond Index ETF (VTEB), saw a 25% expense ratio reduction from 0.12% to 0.09%.

Other reductions in fees included the Vanguard FTSE All-World ex-US ETF (VEU) declining two basis points to 0.11%, the Vanguard High Dividend Yield ETF (VYM) declining one basis point to 0.08%, the Vanguard Total International Stock ETF (VXUS) declining three basis points to 0.11%, and the Vanguard Emerging Markets Government Bond ETF (VWOB) declining two basis points to 0.32%.

Vanguard raised the fees on the Vanguard International High Dividend Yield Index ETF (VYMI) by two basis points to 0.32%.

“The demand for low-cost funds and ETFs, along with intense competition, have made investing far more affordable today than ever before,” added McNabb. “With the broad availability of low-cost options, investors – whether on their own or with the help of a financial advisor or employer – need to focus on the other factors that can lead to investing success, including saving more, developing a suitable asset allocation, using broadly diversified funds, and maintaining discipline through market ups and down.”

Following the reductions in cost, 99% of Vanguard’s US-domiciled ETFs now fall within the lowest cost quartile of all ETFs within their respective categories, according to Morningstar data.

Commenting on Vanguard’s fee-reduction decision, Todd Rosenbluth, Head of Mutual Fund and ETF Research at CFRA Research in New York, noted that lower fees for ETFs will continue to encourage advisors and investors to seek out passive management to build portfolios rather than rely on more expensive and often underperforming active products.

However, Rosenbluth also issued a word of caution, noting the importance that ETFs are not chosen for their fees alone as the country exposure differences of international equity and bond ETFs will impact performance.

To illustrate his point, Rosenbluth noted two examples:

Firstly, the Vanguard FTSE Emerging Markets ETF (NYSE: VWO) has the same expense ratio of 0.14% as the iShares Core MSCI Emerging Markets ETF (NYSE: IEMG), but VWO outperformed IEMG by 110 basis points over a three year period, as of 27 February 2017. Rosenbluth highlighted key exposure differentials, such as Korea (0% of assets in VWO vs 15% for IEMG) and India (11% in VWO vs. 9% in IEMG) as significant influencers in the disparity of fund performances.

Secondly, the Vanguard Total International Bond ETF (Nasdaq: BNDX) has the same 0.11% expense ratio as the iShares International Aggregate Bond Fund (Bats: IAGG) but underperformed IAGG by 72bp over the past year, as of 27 February 2017. Significant country exposure differentials driving relative performances included Japan (22% in BNDX vs. 13% in IAGG) and the UK (8% in BNDX vs. 11% in IAGG).

While some research does suggest that fund fees are the best indicator of future returns, and low-cost funds have tended to outperform high-cost funds over time (See “Vanguard calls for fees “health warning” on funds”), Rosenbluth’s comments are a reminder of the importance to factor in differences between ETF exposures, and how these relate to the investor’s own capital market expectations, when making investment decisions.