(Bloomberg) -- Vanguard Group, which has grown into the world's largest mutual fund manager by offering low-cost investments, is prepared to cut fees further as it seeks to increase market share and boost investor returns in an environment of modest returns.

"We're built to take advantage of economies of scale in this business," Vanguard Chief Executive Officer Bill McNabb said during an interview Tuesday at a Morningstar investment conference in Chicago. "And where we see economies of scale, we pass them onto the investors in the form of lower fees."

This year, Vanguard slashed fees as low as 1 cent per $100 invested to clients with more than $3 billion in selected funds, such as the $373 billion Vanguard Total Stock Market Index Fund, the $133 billion Vanguard Total Bond Market Index Fund and the $189 billion Vanguard 500 Index Fund. The average expense ratio at Vanguard is 18 cents per $100, compared with an industry mean of $1.01, according to company spokesman David Hoffman. McNabb declined to speculate how low fees may go at his firm, which has the majority of its assets in passive funds.

"I don't know what the theoretical number is," said McNabb, whose firm employs about 15,000 people. "Revenue will have to come from somewhere. You've got to pay people to do things."

GROWING IMPORTANCE

For investors, lower fees are a growing difference-maker in the current era of low returns, McNabb said. Over the next decade, returns will average about 2% on fixed-income investments and 6% to 7% on equities, for a balanced portfolio rate of about 5%, McNabb said. With inflation expectations running at about 1.5% to 2%, investors can count on real returns of about 3.5%, he said.

"Investors aren't likely to get bailed out by double-digit returns," McNabb said. "The consequences of that are: if you're in the accumulation stage of life you've got to think about what you're saving, and if you're in decumulation you've got to think about what you're spending."

Vanguard managed more than $3.5 trillion globally as of April 30, the most recent figures available. Investors added an estimated $218 billion to its mutual and ETFs in the 12 months through April, according to Morningstar.

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