NEW YORK (TheStreet) -- During the opening days of December, the Vanguard Total Bond Market ETF (BND) managed to squeak past the iShares Barclays Aggregate Bond Fund (AGG) to become the largest broad-based bond ETF and third largest fixed income ETF by assets.
In an interesting and exciting development, AGG has become the latest victim in the ongoing ETF price war.
According to Morningstar, as of last Friday, BND and AGG boasted assets totaling $13.9 billion and $13.8 billion, respectively.
The showdown between AGG and BND has been years in the making. Launched during the latter half of 2003, AGG quickly became a staple within the fixed income ETF universe. Much of this popularity can be attributed to the fund's first-mover status.Forbes notes that, by the time Vanguard's competing fund first came onto the scene in early 2007, the veteran product had already managed to amass $6 billion in assets. AGG's advantage heading into the showdown was staggering. However, as we have seen, it was no match to Vanguard's low-cost approach. In what has become a signature move, the Pennsylvania-based firm opted to take an axe to expenses in order appeal to cost conscious investors. By charging investors 0.11% for BND, the firm undercut AGG by half. This adjustment has made all the difference. As evidenced by the monthly fund flow data compiled by the National Stock Exchange, BND's rise to dominance is not surprising. Throughout 2011, the Vanguard fund has managed to consistently and substantially surpass AGG in inflows. Year to date, heading into the final month of the year, the fund had welcomed slightly over $4.4 billion compared to $2.2 billion for AGG.. This story mimics other notable price war showdowns pitting iShares against Vanguard. Perhaps the most closely monitored is the MSCI Emerging Markets Index Fund (EEM) vs. Vanguard Emerging Markets ETF (VWO). Despite being nearly two years its senior, EEM was surpassed by VWO in terms of assets. Both funds are designed to mimic the performance of the MSCI Emerging Market Index. However, with a 0.22% expense ratio, VWO is the substantially cheaper of the two options. iShares is not always the loser in these price battles, though. On the contrary, the fund company has taken a page out of Vanguard's book in recent years in hopes of attracting assets to its physically-backed gold ETF instrument. The iShares Gold Trust (IAU) has gathered a respectable following, with over $9 billion in total assets. However, it remains dwarfed by the premier SPDR Gold Shares (GLD). By slashing its expense ratio, the fund has managed to gain some ground, however. Year to date, IAU has welcomed over $2.7 billion. GLD, meanwhile, has seen less than $1.9 billion in net inflows.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV