Over the past several years Barclays Global Investors (BGI) has been the lone provider of U.S.-listed bond ETFs, but now they've got company.
In April, the Vanguard Group launched four ETFs that track Lehman Brothers bond indices. The products are managed by Vanguard's fixed-income group, which manages $310 billion in assets, including $65 billion in bond index funds.
The new ETFs all have expense ratios of 0.11 percent, which is roughly half the median expense ratio of all bond ETFs in ETFguide.com's database, and will compete head-to-head with similar products offered by BGI.
o Vanguard Total Bond Market ETF (Amex: BND)
o Vanguard Short-Term Bond ETF (Amex: BSV)
o Vanguard Intermediate-Term Bond ETF (Amex: BIV)
o Vanguard Long-Term Bond ETF (Amex: BLV)
"We are pleased to expand our ETF offerings to bonds, bringing additional choice to investors and cost competition to the ETF marketplace," says Vanguard Chief Investment Officer Gus Sauter, noting that Vanguard's ETF assets more than doubled over the past year to $27 billion. "Vanguard ETFs are gaining broader appeal among investors because of their low costs, broad diversification and precise tracking."
Unlike standalone ETFs, Vanguard's funds are an additional share class of existing index mutual funds. The unique arrangement allows Vanguard's mutual fund shareholders to convert their shares to the Vanguard ETFs for a nominal fee.
Vanguard introduced the first bond index fund for individual investors more than 20 years ago with the launch of Vanguard Total Bond Market Index Fund in 1986. Today, the nearly $44 billion fund is one of the largest U.S. bond mutual funds.
Including the new offerings, the Valley Forge, Pa.-based Vanguard currently manages a total of 32 ETFs.
In other fixed-income ETF news, BGI has expanded its shelf with the launch of the iShares iBoxx $ High Yield Corporate Bond Fund (HYG), which, as its name implies, tracks the performance of the iBoxx $ Liquid High Yield Index. The index contains roughly 50 issues and is designed to provide a balanced representation of the dollar-denominated high-yield corporate bond market with an average credit rating of B+ from Standard & Poor's and B1 from Moody's.
The fund carries an expense ratio is 0.50 percent.
Ron DeLegge is the San Diego-based editor of www.etfguide.com.