Retiring When's Musings

Friday, December 12, 2025

Deeper Comparison of Vanguard and Fidelity Index Fund Securities Lending.

I have done additional analysis of the securities lending of the various Vanguard and Fidelity standard and Zero Index funds.

The results are quite interesting. After looking at a broader set of indexes, it looks like Fidelity does provide marginally better total net income as a % of AUM than Vanguard on like indexes as noted earlier.

My first analysis did not carefully align AUM measurement dates with the SAI reported dates. Once that was rectified the differences between net lending income narrowed significantly, but with the zero funds lagging all comparable funds.

It is done with a significantly higher volume of lending at a lower margin.

What comes out of the analysis that shaded my earlier analysis is that the structure of the index and the fund's holdings has a MAJOR impact on the net income.

It appears that S&P500 stocks have almost no opportunity to produce income for the funds.

Secondly, it appears that overall small cap with evidence that larger small cap names are the sweet spot for high margin income (VCLAX relative higher income).

On a related note, both the VSMAX and the Fidelity funds apparently are missing the very smallest names that existing the Vanguard Total funds thus also have less high margin opportunities.

Vanguard does seem to do better on lending ex-US, but not sure that holds up in a larger sampling.

Lastly, the Zero Total and Total International funds both lag badly against both their Fidelity counterparts and the Vanguard funds. I believe this is strong evidence that the sampling model of the indexes greatly reduces the opportunity to profit from securities lending.