NEW YORK ( TheStreet) -- A troubling economic climate has weighed heavily on investors' confidence in the idea of active portfolio management. This, in turn, has allowed index mutual funds and the ETF industry to expand at breakneck speed.As evidence of this shift from active to passive investing strategies, Vanguard has managed to dethrone Fidelity Investments to become the largest mutual fund company by assets, putting an end to the latter's two decade reign. Citing a report from the Investment Company Institute, Bloomberg reported this week that as of the end of July 2010, Jack Bogle's Vanguard Group boasted $1.31 trillion in assets. Comparatively, Fidelity's fund assets total $1.24 trillion. Although the shift towards passive management may have been a major element leading Vanguard to steal the crown, another important quality to consider is its dedication to keeping costs low. Hailed by many as an investor champion, founder, Bogle has been long been a harsh critic of the mutual fund industry, calling for reduced costs for shareholders. By utilizing indexes rather than active managers, Vanguard funds typically see far less turnover, allowing for reduced expense ratios. While impressive, the real disparity between Vanguard and Fidelity is likely far greater than the report claims. According to Bloomberg, the numbers included in the ICI report do not include ETF assets. Vanguard offers a growing collection of exchange traded products. Meanwhile, with no funds carrying the Fidelity name, it appears as though the mutual fund firm has missed its chance to become a force to be reckoned with in the ETF industry. Vanguard's taking the top spot in the mutual fund industry is an exciting development and looking ahead I will be closely watching to see if the firm can do the same in the ETF industry. Although still relatively new to the game, Vanguard has made some impressive steps towards gaining supremacy in this arena as well. It continues to be exciting, each month, to watch the ongoing saga play out between the iShares MSCI Emerging Market Index Fund ( EEM) and Vanguard's Vanguard Emerging Market ETF ( VWO). With lower costs and reduced tracking error, VWO has managed to consistently steal assets from the elder EEM. VWO has been a success story and more recently Vanguard has launched other products aimed at stealing away additional market share from industry leaders BlackRock ( BLK) and State Street ( STT).