The share of Vanguard UK assets housed in ETFs has more than doubled since the firm launched its self-directed investment service, illustrating strong demand for the ETF wrapper among retail investors.
Vanguard brought its UK Personal Investor (UKPI) platform to market in 2017 and by the end of the year, ETFs claimed around 9% of the firm’s assets in the UK.
However, this figure has jumped to around 20%, as at the end of last year, highlighting the popularity of ETFs on its UK platform.
The significant role ETFs now play within Vanguard’s overall range is especially impressive given the firm only entered the European ETF market with five products in 2012.
Its range of 34 ETFs now houses €80bn assets across Europe, according to data from Bloomberg Intelligence.
A Vanguard spokesperson also told ETF Stream the share of client assets in ETFs figure does not account for ETFs housed within multi-asset portfolio products such as its LifeStrategy or Target Retirement fund suites.
For the former, ETFs make-up 7.6% of the range’s $44.2bn UK assets, according to research conducted by ETF Stream. As LifeStrategy funds claim 40% of all Vanguard UK client assets, according to Vanguard data, the $3.3bn allocated to ETFs within these products alone is equivalent to 3% of all UK client assets.
Between direct ETF investment and inclusion in fund-of-funds products, ETFs could make up close to a quarter of all Vanguard UK assets – an impressive figure for products that have been live for 10 years or fewer.
While ETFs have the advantage of intraday liquidity, allowing them to trade potentially thousands of securities as quickly as a single stock, Vanguard said its clients have primarily used the wrapper as part of long-term, balanced portfolios.
The top five ETFs on Vanguard UKPI by assets and number of clients invested are:
- Vanguard S&P 500 UCITS ETF (VUSA)
- Vanguard FTSE All-World UCITS ETF (VWRL)
- Vanguard FTSE 100 UCITS ETF (VUKE)
- Vanguard FTSE 250 UCITS ETF (VMID)
- Vanguard FTSE Developed World UCITS ETF (VEVE)
Vanguard added the past year has been challenging for more exotic exposures such as thematics while more assets have funnelled into core building blocks. The firm’s investors have been market agnostic in allocating to such ETFs on its UK platform, as with other broad-beta index trackers.
James Norton, head of financial planners for Vanguard UK, told ETF Stream: “It has been a virtuous circle. While there has been an ongoing global trend towards lower-cost investment products, we have seen that pick up steam over the past few years.
“In particular, the idea of straight-forward, low cost, diversified and long-term investing has increasingly resonated with investors. At the same time, ETFs have proven themselves an excellent tool for implementing exactly that kind of strategy.
“As AUM has grown, that in turn creates efficiencies of scale and liquidity that benefit investors and make the products increasingly attractive.”
It remains to be seen whether similar trends will play out for Vanguard in the rest of Europe. Last Thursday, the firm rolled out its self-directed service, Vanguard Invest Direkt, for German retail investors.
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