Via Financial Times

Vanguard’s assets under management have surged past the $6tn milestone for the first time after it gathered $268bn in new cash in 2019, its third best annual performance on record.

Net global investor inflows for Vanguard rose 16.5 per cent last year from $230bn in 2018, according to preliminary data provided to FTfm by the world’s second largest asset manager.

Vanguard held the title of world’s fastest growing asset manager for seven consecutive years up to 2018. However, its crown appears to have been snatched by its fierce rival BlackRock, which registered inflows of just under $300bn in the first nine months of 2019.

In addition, BlackRock’s iShares ETF arm attracted inflows of $74bn in the final quarter of last year. This suggests Vanguard’s record annual inflow of $371.9bn set in 2017 will be surpassed by BlackRock when it reports full-year 2019 data later this month.

Just a fifth of Vanguard’s 2019 inflows went into its equity funds. About 60 per cent of the new cash went to long-term bond funds and the remaining 20 per cent to short-term money market funds.

Chief executive Tim Buckley said that Vanguard’s army of more than 30m clients had become more cautious after the US stock market hit a fresh all-time high at the end of December following an unprecedented bull run on Wall Street that has lasted for more than a decade.

“Investors have grown more risk averse, more conservative. Valuations for stocks and bonds are full, global economic growth was below its historic trend and we face considerable geopolitical uncertainties, so investors are acting rationally,” said Mr Buckley.

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He said his aim was to extend the fund price war — which has waged between the biggest asset managers over the past decade — into investment advice. Vanguard estimates that US retail investors on average pay 140 basis points annually in portfolio running charges with financial advice accounting for more than half of the costs.

“There is a huge opportunity for Vanguard to lower costs for advice, which will allow investors to keep more of their returns. We plan to spend several hundred million in new investment advice capabilities,” said Mr Buckley. 

Vanguard has just received regulatory permission from the Financial Conduct Authority to roll out an investment advisory service in the UK.

The company’s fast growth has led to persistent technology failings. Its website experienced service disruptions on the last day of 2019, prompting angry comments from clients on online message boards.

“There is a high bar for standards expected by our clients,” Mr Buckley said. “We are investing over $1bn in new capabilities and upgrading existing services and our internal measure of client satisfaction, which is measured across a wide range of metrics, was up by 20 per cent last year. We are determined to make further improvements in services for clients.”