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Vanguard Offers Commission-Free ETF Trading
In early May, Vanguard raised the stakes on competitors by offering its brokerage customers commission-free trading on all 46 of its ETFs, joining the list of ETF providers that offer a way for investors to purchase funds free of charge.
The Vanguard announcement is a big deal because it pairs commission-free trading with some of the lowest-cost and most well-established ETFs in the market. Also, by covering all 46 Vanguard ETFs, it’s now the largest group of ETFs available for commission-free trading.
Charles Schwab offers its brokerage customers commission-free trades on its own ETFs, while Fidelity allows its own brokerage customers commission-free trading on 25 popular iShares ETFs. Other deals have been rumored.
Commission-free trading means that strategies typically used by mutual fund investors, like dollar-cost averaging, can now be affordably applied to ETFs.
Institutional ETF Usage To Rise, Says New Study
According to a recent study from Stamford, Conn.-based Greenwich Associates, the percentage of U.S. institutional investors using ETFs is expected to grow from its current level of 14 percent. Big players like pension funds and endowments already represent half the assets invested in ETFs in the U.S.
Over half of the 70 U.S. institutional investors Greenwich surveyed said their ETF use will rise in the next three years, with 20 percent forecasting growth in ETF investing of 5 to 10 percent in that period. U.S. ETF assets totaled $820 billion at the end of March, according to data compiled by IndexUniverse.com. That means U.S. institutions already have more than $400 billion invested in ETFs, and increased use by big players could make that number skyrocket quickly.
The survey also concluded that at least 30 percent of those surveyed currently don’t use ETFs in their portfolios because they lack familiarity with these instruments. But growth should be spurred as these institutions become more educated.
The institutions that participated in the survey included 43 plan sponsors and 27 money managers. Thirty-eight of the institutions individually manage more than $5 billion. The survey was conducted from March 8 to March 16, 2010.
SEA’s Strange Shutdown
Claymore Securities was forced to close its shipping-industry ETF in late April because a shareholder vote on a proposed change in the fund’s investment advisory agreement didn’t attract enough voters to establish a quorum. The company, acknowledging that this may be the first time in the history of ETFs that a fund has closed for this reason, said all its other ETFs and closed-ends funds reached quorums within allowable periods and successfully approved new investment advisory agreements.
The votes were related to Claymore’s acquisition by Guggenheim Partners in October. Claymore said 91 percent of those who voted approved the new advisory agreement for the Claymore/Delta Global Shipping Index (NYSE Arca: SEA), but the lack of a 50 percent quorum forced the closing. Claymore has already filed with regulators to launch a successor product that will track the same index and trade with the same symbol, “SEA.”
PowerShares Unveils Domestic Small-Cap Sectors
In April, Invesco PowerShares rolled out a family of domestic, small-cap sector ETFs that are based on subsets of the well-known Standard & Poor’s SmallCap 600 Index. The nine funds parallel the Select Sector SPDRs that track subindexes of the S&P 500. They cover the same nine sectors, and each fund’s ticker symbol is the same as that of its SPDR counterpart, except with an “S” on the end.
The new funds include the following:
- PowerShares S&P SmallCap Consumer Discretionary (NasdaqGM: XLYS)
- PowerShares S&P SmallCap Consumer Staples (NasdaqGM: XLPS)
- PowerShares S&P SmallCap Energy (NasdaqGM: XLES)
- PowerShares S&P SmallCap Financials (NasdaqGM: XLFS)
- PowerShares S&P SmallCap Health Care (NasdaqGM: XLVS)
- PowerShares S&P SmallCap Industrials (NasdaqGM: XLIS)
- PowerShares S&P SmallCap Information Technology (NasdaqGM: XLKS)
- PowerShares S&P SmallCap Materials (NasdaqGM: XLBS)
- PowerShares S&P SmallCap Utilities (NasdaqGM: XLUS)
Components have market capitalizations between $250 million and $1.2 billion.
Each ETF charges an expense ratio of 0.29 percent.
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