Vanguard Ups The Ante, Launches Russell ETFs

by on September 22, 2010 | ETFs Mentioned:

After recently rolling out a suite of ETFs linked to popular S&P indexes, Vanguard continued its push to grab a larger share of the ETF market on Wednesday by introducing seven new products linked to Russell benchmarks. The new Vanguard ETFs include:

  • Russell 1000 ETF (VONE)
  • Russell 1000 Value ETF (VONV)
  • Russell 1000 Growth ETF (VONG)
  • Russell 2000 ETF (VTWO)
  • Russell 2000 Value ETF (VTWV)
  • Russell 2000 Growth ETF (VTWG)
  • Russell 3000 ETF (VTHR)

The introduction of these new ETFs represents a new chapter in the intensifying battle between Vanguard and iShares for ETF market share. iShares is currently the biggest player in the U.S. market, accounting for nearly half of all ETF assets. Vanguard ranks third by total assets, but has seen red-hot growth over the last year. Each of the new Russell products will go head-to-head with an existing iShares ETF–meaning that each firm now offers an exchange-traded product tracking identical benchmarks. Consistent with its ongoing strategy, the new Vanguard ETFs are among the cheapest in their respective ETFdb Categories:

Index Vanguard ETF (Exp. Ratio) iShares ETF (Exp. Ratio)
Russell 1000 Index VONE (0.12%) IWB (0.15%)
Russell 1000 Value Index VONV (0.15%) IWD (0.20%)
Russell 1000 Growth Index VONG (0.15%) IWF (0.20%)
Russell 2000 Index VTWO (0.15%) IWM (0.28%)
Russell 2000 Value Index VTWV (0.20%) IWN (0.41%)
Russell 2000 Growth Index VTWG (0.20%) IWO (0.25%)
Russell 3000 Index VTHR (0.15%) IWV (0.21%)

“Russell benchmarks are well-constructed and well-recognized, and meet Vanguard’s ‘best practice’ standards for index construction. Institutional investors, consultants, financial advisors, and others with a preference for Russell indexes now have low-cost Vanguard options to consider,” said Vanguard Chairman and CEO Bill McNabb in a press release [see all the Vanguard ETFs here].

At the end of August, Vanguard’s total ETF assets stood at approximately $113 billion, or about 30% of the $380 billion or so in iShares ETFs. But the company’s growth rate over the last year has been remarkable; assets have grown almost 60% during the last 12 months, compared to only about 21% for the ETF industry as a whole. Much of that increase has been attributed to the competitive cost efficiency of Vanguard products; many of the company’s funds charge expense ratios of less than ten basis points.

Vanguard’s ETF lineup now includes “plain vanilla” market cap/style funds linked to benchmarks maintained by three of the largest index providers: Standard & Poor’s, Russell, and MSCI Barra. The company reportedly has plans to launch municipal bond and real estate ETFs later this year [also see our brand new Mutual Fund To ETF Conveter Tool].

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Disclosure: No positions at time of writing.