Vanguard FTSE 100 Index: June 2026 update

• Vanguard is a pioneer of passive investing

• This fund provides exposure to the largest 100 companies in the UK

• It’s tracked the FTSE 100 index closely since launch

• This fund doesn’t feature on our Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

The Vanguard FTSE 100 Index invests in the 100 largest companies in the UK. While the FTSE 100 is a UK index, many of the companies earn money overseas. Investors are therefore indirectly investing in foreign economies as well as the UK.

An index tracker fund is one of the simplest ways to invest and this fund could be a low-cost starting point for an investment portfolio aiming to deliver long-term growth. It could be used to diversify a global portfolio, or one focused on smaller companies or other investments such as bonds.

The fund doesn’t feature on our Wealth Shortlist as we have a UK tracker fund already on the list that we rate highly.

Manager

Vanguard is a pioneer when it comes to passive investing, having created the first retail index fund 50 years ago. It now runs some of the largest index funds in the world. Given its size, it has a big investment team with the expertise and resources to help its funds track indices and markets as closely as possible, while having scale to keep costs down.

Vanguard funds are run by a large, global team. They’re spread across three investment hubs around the world – the US, UK and Australia. This team-based approach means there’s no named manager on the fund. As a collective team, Vanguard has run this fund for nearly 10 years.

Vanguard also has a trading analytics team, which is responsible for ensuring the funds buy and sell investments efficiently and at a competitive cost. This involves analysing data from different brokers and banks. Lower costs should help the funds track their benchmarks as closely as possible.

Process

This fund aims to track the performance of the UK’s largest 100 companies, as measured by the FTSE 100 Index. It does this by investing in every company, and in proportion with each company’s weight in the index. This is known as full replication and should help the fund track the index closely.

Financials is the largest sector within the index, making up 26.5% of the fund at the end of April. Consumer staples, healthcare and industrials are the next biggest sectors. The top 10 companies currently account for nearly half of the fund, so they can have a big impact on overall performance. This is determined by the underlying index the fund is tracking.

Reducing costs is a key part of keeping the tracking difference between the fund and the benchmark to a minimum. In any tracker fund, factors like taxes, dealing commissions and spreads, and the cost of running the fund all drag on performance. To help keep these costs down, the team aims to make large investments in companies instead of lots of small transactions.

Vanguard will also lend some of the investments in the fund to other providers in exchange for a fee, which can be used to offset some of the costs. It will only lend securities to a limited number of high-quality approved dealers. Vanguard indemnifies the fund against any loss from this process, meaning there should be no negative impact on investors. However, stock lending adds risk.

Culture

Vanguard is currently the second largest asset manager in the world and runs around $12trn of assets globally. The group aims to put the client at the forefront of everything it does, which drives its focus on quality, low-cost index products.

John Bogle founded Vanguard in 1975, and it’s owned by investors. This allows Vanguard to redirect its profits back to investors in the form of lower fees, instead of paying dividends to external shareholders. Bogle believed in creating products that simply track the performance of a market rather than taking a shot at picking individual companies which may beat them.

The team running this fund works closely with other equity research and risk departments across the business. They have daily and weekly meetings to discuss ongoing strategy which could add good support and challenge on how to run the fund effectively.

ESG Integration

Vanguard is predominantly a passive fund house. While it’s offered exclusions-based passive funds for many years, it’s lagged peers in offering passive funds that explicitly integrate ESG criteria by tracking indices that tilt towards companies with positive ESG characteristics, and away from those that don’t.

Vanguard’s Investment Stewardship team carries out most of the firm’s voting and engagement activity. Its stewardship activity is grounded in the firm’s four pillars of corporate governance: board composition and effectiveness, board oversight of strategy and risk, executive pay and shareholder rights.

Investors can access fund-by-fund proxy voting records, although voting rationales are not provided. That said, voting and engagement case studies can be found in the firm’s annual Investment Stewardship report and quarterly Engagement and Voting reports.

Vanguard courted controversy in 2022 when it left the Net Zero Asset Managers’ Initiative, a group of asset managers that have committed to achieving net zero carbon emissions by 2050. It claimed its decision would improve clarity for investors and allow it to speak independently. We viewed this as a disappointing backward step. Furthermore, in 2024 and 2025, it was reported that Vanguard failed to support a single shareholder proposal requiring more action from investee companies on environmental and social matters.

As of the end of April 2026, this fund invests 19.53% in companies involved with the extraction of oil, gas or coal. This could leave the fund vulnerable to fluctuations in commodity prices, regulatory changes aimed at reducing carbon emissions and potential shifts in consumer preferences towards sustainable alternatives. However, the fund’s composition represents the exposure of the FTSE 100 Index meaning the team has no control over the companies included in this passive fund.

Cost

The fund has an ongoing annual fund charge of 0.06%. Our platform charge of up to 0.35% per annum also applies, except in the HL Junior ISA, where no platform fee applies.

Performance

Since the fund launched in November 2016, it’s tracked the FTSE 100 index closely, returning 118.50%* compared to the benchmark’s return of 118.83%. As expected of tracker funds, it’s fallen slightly behind the index over the long term because of the costs involved in running it. However, the tools used by the team have helped to keep performance tight to the index. Remember, past performance isn’t a guide to future returns.

Over the past 12 months, the fund has gained 22.41%. The financials sector contributed the most to the fund’s returns as UK banks performed well. Higher interest rates have benefited banks as they increase the cost of borrowing, which boosts profits.

The basic materials and energy sectors were also positive contributors. Mining companies benefitted from strong demand and higher prices for key commodities like copper and gold. Energy companies performed well, particularly at the start of this year due to the sharp rise in oil prices.

The FTSE 100 recorded its highest annual gain in 16 years during 2025, and this momentum has continued into 2026 with the index reaching new highs. However, the UK stock market, like many other global markets, experienced a sharp selloff in March 2026 following the conflict in the Middle East.

Given Vanguard’s size, experience and expertise running index tracker funds, we expect the fund to continue to track the index closely in the future, though there are no guarantees.