Vanguard Emerging Market ETF became the third-largest U.S. exchange-traded fund this week, surpassing a rival BlackRock fund that just a year ago was twice as big, and adding to evidence that investors are migrating to the cheapest offerings.
The Vanguard fund had $46.2 billion as of Wednesday, more than the $46 billion in iShares MSCI Emerging Markets, according to data compiled by Bloomberg. At the end of 2009, the BlackRock fund was twice as large as Vanguard’s, according to Morningstar.
Vanguard has captured market share in the almost $1 trillion U.S. market for ETFs by using the same low-price strategy it employed to become the nation’s largest mutual fund firm. Vanguard’s emerging market ETF charges a fee of 27 cents per $100 invested, compared with 69 cents for its BlackRock rival.
The two emerging market ETFs ranked third and fourth in asset size as of Dec. 31, according to State Street Corp. The biggest ETF was the $90 billion SPDR S&P 500 ETF Trust sold by State Street.
BlackRock jumped into ETFs with its $15.2 billion acquisition of Barclays Global Investors in December 2009, which added the iShares funds. The world’s largest money manager, BlackRock had $3.45 trillion in assets under management as of Sept. 30.
The firm had $450 billion in U.S. domiciled ETFs at the end of 2010, the most of any company, according to data compiled by State Street. State Street was second with $235 billion; Vanguard was third with $148 billion.