Vanguard Group Inc., the biggest U.S. mutual-fund company, plans to introduce as many as seven Canadian exchange-traded products this year in an effort to take market share from BlackRock Inc. (BLK:US)’s iShares.
The Valley Forge, Pennsylvania-based asset manager is considering adding four to seven new products to its current lineup of 11 Canadian ETFs, said Atul Tiwari, a managing director for the company’s Canadian operations. Vanguard plans to eventually boost its Canadian market share to 15 percent from 1 percent, according to James Norris, managing director of international operations.
“I don’t think it’s unreasonable to have that kind of success in the handful of countries we’re really focused on,” said Norris in an interview in Bloomberg’s Toronto office. “We wouldn’t go into a market if we didn’t think we had a reasonable chance for that kind of success.”
Vanguard, which oversees more than $2 trillion globally, entered the Canadian market in December 2011 and faces competition from iShares Canada, a unit of BlackRock’s iShares holds a 75 percent market share and assets under management of C$40.6 billion ($39.9 billion) as of November, according to the company’s website. Vanguard Canada manages about C$680 million for a 1 percent market share, Tiwari said.
The company may link the new Canadian-listed products to its U.S.-based funds because they have more liquidity, according to Tiwari. The Canadian-listed Vanguard FTSE Emerging Markets Index ETF (VEE) has a market value of C$115.8 million and invests primarily in its U.S. version (VWO:US), which has a market value of $60.2 billion, he said.
“The other advantage is you get the liquidity of the underlying product,” Tiwari said. Actively-managed products, such as mutual funds, are not in Vanguard Canada’s plans at the moment, he said.
Vanguard will attract customers from iShares because of its lower management fees, according to Norris. The average expense ratio for Vanguard Canada’s ETFs is 0.23 percent, compared with an average 0.51 percent fee for iShares, according to the companies websites.
“We have a better product, better capabilities and we align better with clients,” said Norris, who said the firm’s other key markets include the U.K., Australia and Hong Kong. “I’m very confident we will get our fair share.”
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