Analysts say regulatory pressure on fees favours Vanguard, but admit BlackRock will be “hard to knock off its perch”
Vanguard and BlackRock are vying to be the world’s largest asset manager as investors pour more than $1bn (£768.3m) a day into Vanguard funds since the start of the year.
Analysts say Vanguard, which manages $4.4trn of assets globally, might overtake its US rival BlackRock if inflows into its funds maintain its current pace, the FT reports.
According to figures provided by the firm, $215bn went into Vanguard’s funds in the first six months of the year, compared to BlackRock’s $168bn flows over the same period.
Since the start of 2012, investors have poured a net $1.3tn into Vanguard’s, while BlackRock, which currently overseas just over a trillion more assets than Vanguard, saw $762bn assets coming in over the same period.
Analysts say Vanguard is likely to overtake BlackRock in the next five years. One analyst adds Vanguard’s business model, which does not depend on the level of fees to grow its profits, will benefit from global regulatory pressures.
Asset management consultant Avi Nachmany says: “The thrust by regulators to lower fees and the entire investment ecosystem is moving in Vanguard’s favour.”
Vanguard, which has just launched a direct investment service to UK retail investors, has more plans to expand internationally.
Vanguard will open an office in Germany later this year, as well as in Mexico, and is set to boost the exchange-traded funds range for its Australian business, where it is the country’s second largest money manager.
BlackRock was the best performing fund group for flows in Europe in 2016, largely thanks to its ETFs business iShares, according to Lipper.
The group recently said it plans to spend $1bn on technology to improve the performance of its active funds.
It has already completed a number of deals with online wealth firms such as Aladdin Risk, iRetire, iCapital and FutureAdvisor in the US, and most recently with German robo-advice firm Scalable Capital.
In March, BlackRock also said it will reduce headcounts and switch funds into cheaper quantitative investment strategies.
Asset management consultancy Create Research chief executive Amin Rajan believes BlackRock would be “hard to knock off its perch” in spite of Vanguard’s faster growth.
He adds Vanguard would be more vulnerable than BlackRock in a market downturn as result of its reliance on passive funds.
He says: “Given the huge weight of money in Vanguard’s passive funds, its asset base will suffer a disproportionate hit in the next bear market.”