Investors withdrew money last month from Vanguard Group’s emerging-markets exchange-traded fund, the industry’s largest, after the firm said it would replace the fund’s index.

The $57 billion Vanguard MSCI Emerging Markets ETF (VWO) lost $887 million to redemptions in November while its largest rival, BlackRock's (BLK)’s $41.4 billion iShares MSCI Emerging Markets Index ETF gathered $2.34 billion, according to data compiled by BlackRock. Valley Forge, Pennsylvania-based Vanguard, known for its low-cost index-based products, said Oct. 2 it would drop MSCI as the benchmark provider for 22 funds to lower costs.

“We anticipated a certain amount of leakage of assets,” John Woerth, a Vanguard spokesman, said today in an interview. “However, we’re willing to sacrifice short-term cash flow to lower costs for all of our index-fund shareholders.”

Vanguard’s emerging-markets ETF has outdrawn its main competitor in deposits by more than 7 to 1 since the start of 2009, helping the firm gain ground on BlackRock and State Street Corp. among U.S. ETF providers. BlackRock responded in October by cutting fees on six ETFs, including the emerging-markets fund, and creating four new lower-cost ETFs. Charles Schwab Corp. and Invesco Ltd. have also reduced ETF fees this year.

Last month’s shift from Vanguard reflects institutional investors who want to continue to track the MSCI benchmark, Woerth said.

Vanguard’s ETF will track a benchmark provided by FTSE Group. The fund company, the third-largest ETF prover in the U.S. after BlackRock and State Street, said it will start its index changes in January.

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