Vanguard Wins Most Deposits Ever on Indexing Popularity

Photograph Courtesy Vanguard Close

Photograph Courtesy Vanguard

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Photograph Courtesy Vanguard

Vanguard Group Inc., the biggest U.S. mutual-fund firm, attracted more money from investors in the first nine months of 2012 than it has in any full calendar year in its 38-year history.

The company won $113 billion in deposits in mutual funds and exchange-traded funds through September, John Woerth, a spokesman, said today in an e-mail. The Valley Forge, Pennsylvania-based company received $104 billion in 2007, the previous high.

“We’re pleased that investors recognize Vanguard as the low-cost fund leader and continue to entrust assets to us,” Woerth said.

Vanguard has benefited as investors pull money from actively managed funds and plow it into products that track indexes. Mutual funds whose managers pick domestic stocks experienced redemptions of $497 billion in the five years ended June 30 while index funds took in $117 billion, data from Chicago-based Morningstar Inc. (MORN) show.

Vanguard’s mutual funds charge an average annual fee of 16 cents on every $100 invested, compared with 79 cents for the industry, according to data from Denver-based Lipper.

Vanguard attracted $72 billion in mutual-fund deposits through August, more than twice as much as its nearest competitor, Newport Beach, California-based Pacific Investment Management Co., Morningstar data show. The $37 billion it won in exchange-traded fund deposits also topped the industry, data from Boston-based State Street Corp. (STT) show. ETFs typically track indexes and trade throughout the day like stocks.

Vanguard manages almost $1.95 trillion in U.S. fund assets, the company said.

To contact the reporter on this story: Charles Stein in Boston at csteni4@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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