From the November 2010 issue of Research Magazine • Subscribe!

November 1, 2010

More Index ETFs Debut

Vanguard introduces a slew of new ETFs based on S&P and Russell indexes.

It was a busy third quarter for the Vanguard Group. The Valley Forge, Pa.-based fund giant expanded its ETF menu by adding 16 equity ETFs linked to S&P and Russell indexes.  

The new Vanguard ETFs follow large, mid and small company U.S. stocks with growth, value and blend characteristics.  

The Vanguard S&P 500 ETF (VOO), which also debuted, now serves as the ETF share class for the company’s flagship Vanguard 500 Index Fund (VFINX). At the end of August the latter had over $86 billion in assets.

“The new Vanguard index funds and ETFs offer our trademark low costs and tax efficiency, and aim for the utmost tracking precision. They will appeal to financial advisors and institutional investors seeking to build portfolios based on S&P benchmarks. The new ETFs will help Vanguard continue to build momentum in the ETF marketplace,” said Vanguard chairman and CEO Bill McNabb.

The Vanguard Russell ETFs, according to Morningstar data, will have an average expense ratio of 0.16 percent which is lower than the 0.23 percent average expense ratio of competing ETFs.

Vanguard has been locked in a heated battle with competitors like BlackRock, Charles Schwab and State Street Global Advisors over ETF assets. Earlier in the year, the firm introduced commission-free trading on Vanguard ETFs for its brokerage customers. Also, VOO takes direct aim at the SPDR S&P 500 ETF (SPY) with lower annual expenses of 0.06 percent compared to 0.09 percent.

The Vanguard S&P and Russell ETFs join the company’s other stock ETFs, which follow MSCI constructed indexes.

In the coming months, Vanguard is planning three new municipal bond index funds with traditional and exchange-traded shares, tracking benchmarks in the S&P National AMT-Free Municipal Bond Index series. The expense ratio for each of Vanguard’s new municipal ETFs is estimated to be 0.12 percent.
Vanguard has also filed for a new real estate fund, which will be benchmarked to the S&P Global Ex-U.S. Property Index. Vanguard Global ex-U.S. Real Estate Index Fund will offer Investor Shares, Institutional Shares, Signal Shares, and ETF Shares.

Vanguard managed $113.34 billion in ETF assets as of the end of August.

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