Vanguard – the world’s largest manager of low-cost mutual funds – may soon become the world’s biggest issuer of Exchange Traded Funds (ETFs). Britain’s Daily Telegraph reports that Vanguard has bid USD 5 billion for Barclays’  iShares unit, the global issuer of ETFs that is by far that sector’s largest player.

Barclays had already agreed to sell iShares to private equity fund CVC Partners for USD 4.4 billion in April, but has been soliciting higher offers under a “go-shop” clause in the contract. Speculation had been that the British bank was seeking to unload all of it Barclays Global Investors (BGI) unit – which includes iShares and other asset management products – to firms such as Blackrock or BNY Mellon, but no deal has yet been announced. Barclays is desperately trying to raise cash in an effort to avoid the fate of the Bank of Scotland and Lloyds, which have both been nationalized by the British government.

If Vanguard is successful, it would create a giant in the ETF industry with over USD 300 billion of ETF assets in the US alone, and a presence in 15 global markets. Vanguard pioneered the low-cost, no-load indexed mutual fund concept in the 1970’s, but price minded investors have been turning to ETFs recently because of their even lower cost. Vanguard’s move could signal a big shift from mutual funds to ETFs, which are also more transparent and easier to trade.

The implications for investors would be unclear. The combined firm would have significant economies of scale and pricing power, and thus may be able to offer lower expense ratios than its competitors.

Barclays has until June 18 to consider rival offers for some or all of BGI, at which point the CVC deal will become binding.