A newsletter that tracks Vanguard has asked the fund giant to better disclose its own investments in its Viper (Vanguard Index Participation Equity Receipts) ETF, MarketWatch reports.
Daniel Wiener, editor of The Independent Adviser for Vanguard Investors newsletter, estimates that one-third of the money in Vipers at the end of last year came from Vanguard mutual funds.
"Vanguard ought to disclose that shareholders in Vanguard mutual funds are driving the scale that's led to cost reductions in the Vipers," Wiener said, referring to Vanguard's fee reductions in light of strong asset growth.
But Vanguard said the company's investments in its Viper ETFs are simply practical tools for its actively run funds to manage cash flows. The company also said Weiner's estimates are a bit high and that it only owns about one-quarter of the assets in Vipers.
Recent research shows an increasing number of active funds are using ETFs to equitize cash because the funds are liquid and trade throughout the day. Fund managers can put new money to work in stock markets immediately or cash out of the ETF to meet investor redemptions.
"Asset managers are also turning to ETFs as a transition tool to remain invested in the market while new stocks are selected for purchase," said chief investment officer Gus Sauter. He disagreed that Vanguard is primarily responsible for the asset growth leading to the Viper expense cuts.
Weiner said that while he didn't think there was anything wrong with Vanguard owning most of its Vipers, he felt the company should do a better job of disclosing that to shareholders.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.