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The value of clients’ assets that Vanguard manages outside the US has topped $1tn and it is plotting a major international expansion, aiming to double its customers and assets within five years.
Salim Ramji, chief executive of the world’s second-largest asset manager, told the FT that there will be “incredible opportunities” globally as governments attempt to encourage millions of savers to invest their excess cash.
He said the UK and Europe are heavily weighted towards cash and cash deposits, partly because investing is “too costly, it’s too complicated and there are lots of barriers in the way [to] helping people make good long-term investments”.
Vanguard, which oversees assets worth more than $12tn globally, specialises in low-cost products and offers ready-made investment funds for “DIY” investors.
The company aims to more than double its 17mn international clients within the next five years to nearly 40mn.
Ramji’s comments come as governments including the UK devise policies to encourage investment in a bid to both improve retirement outcomes and funnel more money into domestic economies.
Vanguard is one of 19 firms backing a UK government initiative to encourage savers to invest their cash.
Last week, Vanguard cut fees on its popular £52bn LifeStrategy range. It also reduced the funds’ exposure to UK assets to invest more in global stocks, which the firm said was a response to client demand.
Founded by Jack Bogle in 1975, Vanguard is renowned for offering retail investors low fees on funds that track an index, but also offers actively managed stockpicker funds.
The rapid rise of index-tracking and exchange-traded funds has boosted the likes of Vanguard and BlackRock. Both have reported a huge surge in assets under management in recent years, largely as a result of low-cost passive products.
Chris McIsaac, head of Vanguard’s international business, said its business outside the US had doubled its assets in the past three years: “At this pace, it will take us another five to attract the next $1tn.”
He added: “We see incredible opportunities in international markets — people are under-participating in capital markets. Index funds and ETFs . . . are under-represented in investor portfolios in international markets.”
Ramji said “market forces” were helping people to invest as asset managers jostle to lower their costs to attract customers.
“The average Vanguard fee in Europe is 14 basis points. The average fee that the industry charges is 65 basis points,” he said.
Unlike many rivals, Vanguard is owned by the investors in its funds rather than outside shareholders, meaning profits left over after are returned to investors in the form of fee cuts.
