Vanguard is one of the largest asset management companies in the world, with over $7 trillion in assets under management as of January 2023. Given Vanguard’s size and influence in the financial services industry, it has gained several major competitors over the years seeking to grab a share of the passive investing market.
Top Vanguard Competitors
Vanguard’s biggest competitors include:
- BlackRock
- State Street Global Advisors
- Fidelity Investments
- Charles Schwab
These companies all manage trillions in assets and offer a range of investment products and services that compete directly with Vanguard. Let’s take a closer look at each of Vanguard’s major competitors.
BlackRock
BlackRock is widely considered to be Vanguard’s biggest competitor. The company has over $10 trillion in assets under management, making it the largest asset manager in the world. BlackRock offers a wide variety of index funds and ETFs that compete directly with Vanguard’s offerings. Some of BlackRock’s key index fund families like iShares absorb a significant portion of passive investing market share.
One key advantage BlackRock has over Vanguard is its iShares ETF brand. iShares dominates the ETF market, managing over $3 trillion in ETF assets compared to Vanguard’s $2 trillion. BlackRock has utilized the popularity of ETFs to fuel huge asset growth. However, when it comes to mutual funds, Vanguard still holds the edge.
State Street Global Advisors (SSGA)
State Street Global Advisors (SSGA) has over $4 trillion in assets under management, making it one of the largest asset managers worldwide. SSGA offers a wide variety of index mutual funds and ETFs. Its SPDR ETF brand is one of the most recognized in the industry.
While smaller than Vanguard and BlackRock, SSGA still garners significant market share in passive investing and is widely used by both retail and institutional investors. The company is strongest in the ETF space, managing nearly $1 trillion in ETF assets.
Fidelity Investments
Fidelity Investments manages $11 trillion in total client assets. While a significant portion of Fidelity’s managed assets are actively invested, the company still offers a robust lineup of index mutual funds and ETFs. Fidelity’s index funds and ETFs have become increasingly popular with cost-conscious investors.
Fidelity offers over 500 mutual funds, including dozens of index funds that cover most major market segments. While Fidelity has a smaller share of the passive investing market compared to Vanguard, the company’s brand strength, distribution network, and existing customer base make it a major player.
Charles Schwab
Charles Schwab manages around $7 trillion in total client assets. Like Fidelity, Schwab caters to a wide range of investors and offers a diverse lineup of investment products including index mutual funds and ETFs. Schwab’s index funds have attracted significant inflows in recent years.
As one of the largest discount brokers, Schwab can distribute its index funds and ETFs to millions of investors nationwide through its established brokerage platform. Availability on Schwab’s platform gives their index funds built-in advantage in terms of access and distribution.
Comparing Vanguard to Top Competitors
Here is a table comparing Vanguard to its major competitors across several key metrics:
| Company | Assets Under Management | Number of Index Funds | Number of ETFs |
|---|---|---|---|
| Vanguard | $7 trillion | Over 100 | Over 200 |
| BlackRock | $10 trillion | Over 100 | Over 400 |
| State Street Global Advisors | $4 trillion | Over 100 | Over 200 |
| Fidelity | $11 trillion | Over 80 | Over 100 |
| Charles Schwab | $7 trillion | Over 60 | Over 100 |
This table shows that while Vanguard is among the largest passive investment managers, companies like BlackRock and Fidelity manage even more total assets. However, when looking specifically at index funds, Vanguard still offers one of the leading lineups in the industry with over 100 index mutual funds spanning nearly every market sector.
BlackRock manages the most ETF assets under its iShares brand name, but Vanguard also holds significant ETF market share. The other competitors offer a smaller but still considerable number of ETFs seeking to gain market share in the fast-growing ETF space.
Factors Driving Competition in Passive Investing
Several key factors have increased competition in the passive investing industry and driven the rise of major Vanguard competitors:
- Investor demand for lower costs – Investors have flocked to passive investing to lower portfolio costs. Vanguard’s competitors have responded by lowering fees.
- Growth of ETFs – The ETF industry has boomed over the past decade. Rivals like BlackRock and Schwab have quickly grown ETF assets.
- Index investing performance – Compelling long-term performance data has accelerated flows to passive funds.
- Increasing technological capabilities – Advanced technological systems have enabled large asset managers to efficiently track indexes and manage huge passive fund portfolios.
These drivers have led more firms to target the index fund market and launch competitive offerings. While Vanguard retains impressive market share, rivals continue to chip away by attracting a portion of new passive inflows.
How Vanguard Competes with Rivals
Vanguard employs several strategies to maintain its leadership in passive investing and ward off competitor threats:
- Lower costs – Vanguard stays ahead by being the low-cost leader. Its ownership structure helps minimize fees.
- Brand reputation – Vanguard is synonymous with index investing. Its trusted brand and customer loyalty help retain assets.
- Broad fund lineup – Vanguard offers an enormous index fund and ETF menu covering all asset classes.
- Client education – Vanguard emphasizes investor education on the benefits of long-term passive investing.
- Strong performance – Vanguard indexes have delivered competitive long-term returns to investors.
Maintaining these advantages allows Vanguard to stand out against challengers. However, the rise of worthy competitors ensures constant innovation and an increased focus on investors’ interests across the industry.
Conclusion
Vanguard’s most prominent competitors include BlackRock, State Street, Fidelity, and Charles Schwab. These firms manage trillions in assets under management, with BlackRock being Vanguard’s largest competitor at over $10 trillion in AUM. Stiff competition has emerged in the ETF space, an area where Vanguard once dominated. However, when looking specifically at index mutual funds, Vanguard remains the leader in number of funds and total assets under management.
Intense competition has forced Vanguard to aggressively minimize fees and innovate its product mix. But Vanguard’s brand strength, fund performance, and focus on investor education continues to give it competitive advantages. Passive investing investors benefit from the ongoing innovation and downward fee pressure sparked by the rivalry between Vanguard and its largest competitors. The competition ensures no single firm fully controls the passive investing marketplace.