Skip to Content
Investing Specialists

Is Vanguard Making a Bold Grab for ETF Market Share?

Reports that the family has made a $5 billion bid for iShares would not sit well with the founder.

Mentioned: , ,

Is Vanguard trying to buy iShares? If so, is it biting off more than it can chew?

The company isn't saying, but the Sunday Telegraph in London over the weekend reported Vanguard, one of the world's largest mutual fund companies, had made a $5 billion bid for  Barclays(BCS) iShares, the biggest player in the exchange-traded fund market. The newspaper reported Vanguard, which launched the first index fund in 1976, made the offer for the unit of London-based Barclays in recent weeks. Vanguard declined requests for comments on the report, which has been repeated widely.

If the report proves to be true, it would have serious ramifications for the ETF market and for Vanguard's culture. A deal would unite the first- and third-largest competitors in the ETF field. At the end of April, Barclays controlled 49% of the ETF market, and Vanguard, which had ceded the ETF field to iShares earlier in the decade, had a little less than 10%, according to Morningstar fund flow data. Combined they would have about $312 billion, or nearly 60% of the U.S. ETF market, based on April 2009 asset levels.

Dan Culloton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.