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Vanguard Launches Second Assault on iShares

For the second time in as many weeks, Vanguard has launched a wave of broad market style box ETFs aimed at unseating its largest rivals. Vanguard declared war in its fight for ETF supremacy two weeks ago by targeting SPDRs and iShares with the launch of nine ETFs covering the S&P index style boxes. Today's announcement consists of seven new ETFs squarely aimed at the Russell-indexed ETFs from BlackRock's iShares that have been on the market for more than 10 years.

Once again, Vanguard has chosen not to try to differentiate its products based on unique investment strategies, new indexes or being first to market. Instead, it is challenging the competition head-on and differentiating its offerings by price and brand name. Vanguard has wisely chosen to draw the battle lines where it has an advantage.

Vanguard Russell 1000 ETF has an expense ratio of 0.12% and will compete directly with iShares Russell 1000 (IWB), which has a 0.15% expense ratio and is the third-largest ETF in the large-cap blend category behind SPDR S&P 500 (SPY) and iShares S&P 500 (IVV).

Vanguard Russell 1000 Growth ETF has an expense ratio of 0.15% and will compete directly with iShares Russell 1000 Growth (IWF), which has a 0.20% expense ratio and is the second-largest ETF in the large-cap growth category behind PowerShares QQQ (QQQQ).

Vanguard Russell 1000 Value ETF has an expense ratio of 0.15% and will compete directly with iShares Russell 1000 Value (IWD), which has a 0.20% expense ratio and is the current asset leader in the large-cap value category.

Vanguard Russell 2000 ETF has an expense ratio of 0.15% and will compete directly with iShares Russell 2000 (IWM), which has a 0.20% expense ratio and is the asset leader in the small-cap blend category.

Vanguard Russell 2000 Growth ETF has an expense ratio of 0.20% and will compete directly with iShares Russell 2000 Growth (IWO), which has a 0.25% expense ratio and is the asset leader in the small-cap growth category.

Vanguard Russell 2000 Value ETF has an expense ratio of 0.20% and will compete directly with iShares Russell 2000 Value (IWN), which has a 0.25% expense ratio and is the asset leader in the small-cap value category.

Vanguard Russell 3000 ETF has an expense ratio of 0.15% and will compete directly with iShares Russell 3000 (IWV), which has a 0.20% expense ratio and is the second-largest ETF in the total U.S. market category behind Vanguard Total Stock Market ETF (VTI).

Russell style-box indexes tend to be favored over similar indexes from S&P by ETF investors seeking to control style-box allocations within their portfolios. As a result, the existing iShares Russell ETFs are the asset leaders in most of these categories, with combined assets for the seven ETFs currently around $45 billion.

Vanguard chose to not bring the all-cap Russell 3000 Growth and Russell 3000 Value ETFs to market. Their reasoning was not declared, but I would suspect the relatively low assets of less than $300 million each in iShares Russell 3000 Growth (IWZ) and iShares Russell 3000 Value (IWW) is the primary factor.

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At the time of publication Ron Rowland was long IVV and had no positions in any of companies or ETF sponsors mentioned, and receives no income, revenue or other compensation (either directly or indirectly) from, or on behalf of, any of the companies or ETF sponsors mentioned. Rowland is the founder and president of Capital Cities Asset Management, a fee-based registered investment adviser in Austin, Texas. He is also the founder and publisher of Invest With An Edge and All Star Investor, where he has been providing market commentary and active investment advice since 1991. Opinions expressed in this article should not be considered personal recommendations to buy or sell any security.

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