http://www.teletext.co.uk/finance/insurance/default.aspxen-gbTue, 17 Feb 2009 18:10:37 GMThttp://www.teletext.co.uk/images/Logo64x64.gifhttp://www.teletext.co.uk
The ultra low-cost US mutual fund group Vanguard has announced plans to launch into the already crowded UK market.

It gained fame for bargain tracker funds with fees that are a fraction of the cost of traditional rivals. The group manages $1.1 trillion in assets and serves more than 23m accounts.

Subject to regulatory approval, Vanguard is expected to launch a range of index-tracking funds in 2009.

Presently Vanguard offers some 200 funds to US investors.

As well as running actively managed funds, the group has portfolios tracking indices such as the FTSE 100 in the UK, and the Dow Jones and S&P 500 in the US.



Vanguard was established in 1974 by John Bogle and it made its name with tracker funds.

As such the success of the fund is dependent upon the fortunes of the index it is tracking.

Financial advisers hope Vanguard's arrival in Britain could spur a price war between UK-based fund managers

The average Vanguard index fund has an annual charge of 0.15%, much less than the fees on UK index funds, which can range from between 0.7% to 1%.

In addition, its mean annual expense ratio for all portfolio funds is 0.2%, compared with an average of 1.5% for actively-managed UK funds.

This is before administration costs are thrown into the mix. In some cases these mean the total expense ratio (TER) can creep up to nearer to 2%.

Vanguard European Stock Index Investor fund has a TER of 0.5% while its US 500 Stock Index Investor's TER is 0.38%.

The Legal & General UK 100 tracker charges 0.75% and has a 0.84% TER, says finance adviser Informed Choice. The Virgin UK Index Tracker has a 1% TER.

Investors looking for a low-cost way to track markets can also look to exchange traded funds (ETFs).

ETFs track the market in the same way as index funds but, like shares, you can buy and sell them and costs are a lot lower than typical funds, starting at around 0.25%.

Unlike shares, you do not have to pay stamp duty on purchases. ETFs track a range of global industries and markets.

Many argue that over the long term, a simple index tracker will outperform a more costly, actively-managed vehicle.

Warren Buffett, the world's most famous stock picker and boss of Berkshire Hathaway, advocates this maxim.

Back in 2007, he said: "A very low cost index fund is going to beat a majority of the amateur managed or professionally managed money." Source: thisismoney.co.uk

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