European investors have saved over £77.4 billion by investing in index funds since 2011, according to research from Vanguard.
The asset manager looked at the assets in indexing and multiplied this by the difference between active and index fund expense ratios for European domiciled funds.
While expense ratios for both active and index funds have fallen over the last 12 years, Vanguard noted that the average asset-weighted expense ratio for active funds at the end of 2023 was 1.05% compared to 0.21% for index funds.
Stephen Lawrence, head of Indexing Research, Vanguard, said: “Index funds have vastly improved outcomes for investors. One of their main benefits is low fees, which has a strong historical correlation with better-than-average fund performance.
“They have also introduced significant competitive price pressure to the industry, benefitting all investors. While there are plenty of skilled active managers out there, the benefits of their skill can be swallowed up by costs.
“Vanguard believes low-cost funds, active and index, will continue to play an important part in investors’ portfolios, however high-cost funds will not.”
Vanguard launched its low-cost D2C platform in the UK in 2017. In 2020, it launched its advertising campaign built around the idea of offering value to investors, which was refreshed in 2022.
Founded in the US in 1975, Vanguard is best known for pioneering index tracker funds, which track the performance of an entire market index rather than actively selecting individual stocks, allowing them to charge lower fees.
