Vanguard overtakes Pimco and M&G in Europe

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Vanguard, the disruptive US asset manager, has leapfrogged traditional active houses M&G and Pimco to become one of Europe’s largest retail investment groups, underscoring its rapid growth just over a decade since entering the market.

Low-cost fund specialist Vanguard overtook Pimco, the bond giant made famous by its outspoken co-founder Bill Gross, to become the sixth-largest investment group in Europe by assets, according to data provider Morningstar.

The ranking, which applies only to retail and exchange traded funds, meaning it excludes the impact of institutional mandates, shows Vanguard managed €163bn in assets at the end of March, more than double the amount it managed five years ago. Pimco’s European assets stood at €156bn.

Pennsylvania-based Vanguard has made a determined push into Europe in the past decade, aiming to steal business from more expensive active managers by promoting its low-cost passive funds. It set up its first European outpost in London in late 2008 and has since opened offices in Frankfurt and Dublin. 

Vanguard also recently pulled ahead of M&G, the group that launched Britain’s first ever unit trust in 1931, in a separate Morningstar ranking of the largest managers of UK funds.

Vanguard managed more than £30bn in the UK at the end of last month, moving it from 10th position to eighth. M&G is ninth, with £29.9bn in retail assets, according to the UK ranking, which includes money market funds.

Vanguard’s ascent highlights the clear threat low-cost passive providers pose to dyed-in-the-wool active fund managers, particularly at a time when many traditional groups are reeling from the market turbulence unleashed by the coronavirus crisis.

Pimco was rocked by €23.8bn in European net outflows in March, its highest monthly redemptions on record as investors fled bond funds in droves. M&G posted €4.4bn in withdrawals, with large sums flowing out of its flagship Optimal Income fund.

Other established active managers to suffer were Schroders and Invesco, which bled €6bn and €3.2bn respectively.

But Vanguard avoided the worst effects of the turmoil, ranking as Europe’s best-selling fund manager in March with almost €3bn in net sales, according to Morningstar. Its UK DIY investing service had a 40 per cent jump in clients since the beginning of February, said Sean Hagerty, the company’s head of Europe.

Warren Miller, chief executive of fund research company Flowspring, said Vanguard was in the perfect position to capitalise on the crisis, with investors seeking its low-cost options. “This trend lies in direct contrast to active manager hopes that investors would pay up in a pandemic for ‘skilled’ active management,” he said.

Mr Hagerty said: “In these unprecedented times, investors don’t want to pay high fees, they want value for money from a provider they can trust.” Investors’ best chance of success in the current environment was to stay the course while “controlling what they can control, the costs they pay to invest”, he added.

Pimco said its “defensive positioning and liquidity management enabled [it] to navigate unprecedented market volatility in March that impacted virtually every segment of the asset management industry”. M&G declined to comment.




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