Editor's Note
By Journal of Indexes Staff

The reason for all the movement, consolidation and expansion is fairly simple. Mo' money. Index assets continue to expand - and not just in a billion here billion there sort of way. Indexing is making up a bigger and bigger part of the invested assets (currently 15% even among retail mutual funds - up from less than 10% just five years ago. While active funds have suffered declining or flat asset levels, indexed assets have continued to grow…rapidly.

Source: The Bogle Financial Markets Research Center

And all of that inflow has raised the level of competition in an industry with already microscopic management fees. The result is innovation, better managed products and better value for investors. Indeed, even Fidelity has now entered the business with very low fee funds that aim to directly take on Vanguard. And that can't be a bad thing.

Far be it from me to dip into the sacrosanct, but at the asset levels we're now talking about, it doesn't take a lot of basis points to make money on the larger funds. And while John Bogle may attack the "Perfect 10" ads of Fidelity, I've noticed a large volume of marketing and sales efforts coming out of the sprawling Valley Forge campus. And I say this recognizing the argument that an expanded base leads to better economy of scale for all investors.

Perhaps the new competition from the likes of Fidelity and ETrade and from ETFs like the low-fee SPDRs and iShares will inspire some introspection at Vanguard. Ultimately, no one wants to engage in a fight for the bottom on fees, but index funds should be, well, index funds, and I think it's great that competition is there to remind everyone of the Bogleian roots, all of which spring from…keeping…costs…down.

So a gentle reminder to ALL of you index providers and fund managers bombarding us with index products…don't focus on ramping up market share and margin so much that you forget why all the investors have moved into this space. Hint: it's not because of all the ads (save perhaps, those extremely effective ads placed in targeted magazines like...well, like the Journal of Indexes).

It's all about the investor. Why not work on attracting the younger and smaller investors? And on providing better products for those who understand indexing, and information and clarity for those who don't? And above all, keep the fees coming down as the assets go up.

Enjoy the issue - it's a good one.

Jim Wiandt

Editor