Vanguard is fast catching up on BlackRock as the world’s biggest money manager as the two titans of the global asset management industry, who collectively manage $11.5tn, battle for even greater market share.
Pennsylvania-based Vanguard attracted $112bn of net new flows in the first half of the year, compared to BlackRock’s haul of $77bn. Vanguard picked up a further $23bn in July, while BlackRock had outflows from its retail products. One analysis predicts Vanguard could overtake its New York competitor by 2021.
The two fund giants, whose combined assets are worth more than a third of the US stock market, have engaged in an aggressive battle for growth in recent years, leaving smaller competitors in their wake and sending shockwaves through the wider investment industry.
BlackRock has held the crown of world’s biggest fund manager since its acquisition of Barclays Global Investors in 2009.
Daniel Wiener, editor of the Independent Adviser for Vanguard Investors, a newsletter that monitors the group, said there was little difference between the two companies.
“I don’t think they’re doing anything very different,” he said. “It’s just that the low-cost train has picked up steam. More investors are aware of the benefits of low cost and Vanguard has the reputation as the leader in that regard.”
Vanguard’s asset growth has outpaced its fierce rival’s in recent years, with both managers competing neck and neck in 2017 and attracting just over $1bn a day. But each has since struggled to reach the heights of last year’s record inflows.
The slower pace of growth this year reflects a challenging period for global asset managers, as market volatility, concerns over global trade and rising interest rates have hit returns and dented investor risk appetite.
Total assets under management for Vanguard stood at $5.2tn at the end of July, compared to $6.3tn for BlackRock. As recently as 2009 Vanguard’s assets were equivalent to just 45 per cent of BlackRock’s.
In the eight years to the end of 2017, Vanguard’s assets grew at a compound growth annual rate of 16 per cent compared to 8 per cent for BlackRock. Pensions & Investments, the US specialist publication, has pointed out that at that rate Vanguard would overtake BlackRock by the end of 2021 and reach $20tn of assets under management by 2027.
Vanguard’s growth has, however, dropped off this year, though it is still outpacing BlackRock. Vanguard’s first half sales were down 43 per cent compared to the same period last year, while BlackRock was down 54 per cent. BlackRock bled $4.4bn from its retail products in June and July, according to Morningstar, the data provider.
Both fund houses are known primarily for their multitrillion-dollar books of cheap passive funds, but each has sizeable active ranges that generate strong revenue streams.
Vanguard said: “We are grateful that investors continue to entrust their assets to Vanguard’s low-cost ETFs, but we don’t view this as an asset-gathering horse race. Cash flow is never a goal at Vanguard. We remain focused on delivering value for our clients — if they are successful, then we will be successful.”
BlackRock did not provide a comment, but reiterated a statement in its second-quarter earnings release: “Despite an industry-wide slowdown in flows associated with investor uncertainty in the current market environment, our dialogue with clients and opportunities to provide long-term solutions are more robust than ever before.”