* Sean Hagerty says to maintain double-digit growth
* Currently runs $142 bln on behalf of Europe clients
* To build continental European distribution, sales
ZURICH/LONDON, May 26 (Reuters) - Vanguard, the world's second-biggest asset manager, expects new European rules aimed at making fund costs more transparent will help it deliver double-digit growth as it expands in the region.
Sean Hagerty, head of Vanguard Europe, told Reuters that the money it manages in Europe, which is currently $142 billion, would grow strongly. The Malvern, Pennsylvania-based firm manages $4.2 trillion at cost price for investors worldwide.
"The growth rate in Europe has been somewhere close to 30 percent. I don't know whether we can maintain that because it is off a small base, but I would say our growth rate would continue to be pretty robust. I would say double digits," he said.
Total European industry assets under management stood at 22.8 trillion euros ($25.5 trillion) at the end of 2016, data from the European Fund and Asset Management Association showed, the second-largest market, with 31 percent of global assets.
Vanguard plans to grow its institutional client business in continental Europe, with significant expansion in Switzerland and Germany, Hagerty said.
The growth would be focused on distribution capabilities, including client and sales support, as well as its product range. Vanguard Europe runs 22 exchange traded funds, but Hagerty said this could double over the next five years.
While its growth had previously been hampered by the market practice for asset managers to offer inducements to financial advisers who introduced clients - which Vanguard refused to do - regulatory changes in Europe are gradually removing this hurdle.
Chief among them is the Markets in Financial Instruments Directive II, due to go live in January, 2018, which limits these "retrocessions" and requires more transparency on the fees and costs charged by a fund to its investors.
"Mifid II is having an impact and I think the market place is evolving into a more transparent model," Hagerty said.
Vanguard last week announced the launch of a new direct-to-client online platform in Britain and while Hagerty said the group would eventually look to roll the model out across other European markets, "that is still a ways off."
While Vanguard has a quarter of its assets in actively managed funds, the rest is in index funds, demand for which continues to surge. Six of the 10 best-selling European funds in April were passive, data from Thomson Reuters Lipper showed.
"There is growing recognition among consumers that they are paying more for than they need to for asset management services," Hagerty said, ($1 = 0.8955 euros) (Writing by Simon Jessop; editing by Alexander Smith)