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Portfolio > Portfolio Construction

Top Portfolio Products: Vanguard Takes Another Shot in ETF Fee War

By Marlene Y. Satter

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Portfolio Products logoIn recent portfolio news, Vanguard cut fees on its 500 Index Fund ETF via a reverse share split, and Franklin Templeton launched two new global funds.

In addition, ETF Securities announced a new ETF building and management service for asset managers, Putnam said it would provide financial wellness services for 401(k) plan participants, and Everence and Praxis announced a $2 million commitment to a World Bank green bond.

Here are the latest developments of interest to advisors:

1) Vanguard Lowers VOO ETF Costs with Reverse Share Split

Vanguard announced Wednesday that it was planning a 1-for-2 reverse share split of its Vanguard 500 Index Fund ETF (VOO) shares. The move is seen as the latest volley in the ETF fee war, as Vanguard and other firms vie to drop ETF fees continually lower. The split, according to Vanguard, is expected to cut overall transaction costs to buy and sell shares of VOO. It will cut the bid-ask spread, which is seen as the latest area in which ETFs can slash fees.

The company said that the reverse split will increase the price per share with a proportionate decrease in the number of shares outstanding. The total market value of the shares outstanding will not be affected, except with respect to the redemption of fractional shares. Shareholders who end up holding fractional shares will find those shares redeemed for cash and sent to the broker of record, the company said. As of Oct. 24, shares will be offered on a split-adjusted basis. Conventional shares will not be affected by the move.


2) Franklin Templeton Launches Two New Global Funds

Franklin Templeton announced Thursday the launch of two new funds, the Franklin Global Government Bond Fund and the Franklin Global Listed Infrastructure Fund.

The Franklin Global Government Bond Fund invests in global government bond markets with a focus on investment-grade issues. Co-managed by John Beck and David Zahn, the fund seeks to maximize total investment return consisting of a combination of interest income and capital appreciation, and to achieve its objective by investing in fixed- or floating-rate debt securities and obligations issued by government and government-related entities located throughout the world and by taking opportunistic exposure to other securities, such as corporate bonds and mortgage-backed securities. It may also invest in investment-grade obligations issued by emerging market governments and make limited purchases of below investment-grade securities.

The Franklin Global Listed Infrastructure Fund seeks total investment returns, consisting of income and capital appreciation, by investing in the securities of infrastructure-related companies whose principal business is the ownership, management, construction, operation, utilization or financing of infrastructure assets around the world. The fund is co-managed by Wilson Magee and Jack Foster, and its investment universe includes companies across the infrastructure-related sectors of utilities, transportation and energy.

3) ETF Securities Launches ETF Building and Management Service

ETF Securities announced recently that it has launched CANVAS, a service enabling asset managers from around the world to build and launch white-labeled ETFs in Europe. CANVAS will provide a number of ETF-based solutions, including the ability to build ETFs using ETF Securities’ full infrastructure, set up a dedicated ETF platform, convert existing UCITS funds into ETFs or add an ETF share class into a UCITS fund.

CANVAS offers its expertise to provide a comprehensive choice of ETF-based solutions to passive and active asset managers. Its open architecture model supports a broad range of services from the development to the full management of an ETF, with a focus on speed to market as well as capital and resource efficiency. 4) Putnam Offers Financial Wellness Services to 401(k) Clients

To help its clients’ 401(k) plan participants overcome problems in saving for retirement at adequate levels, Putnam Investments has announced that early next year, it will be providing access to personal financial wellness services, including information and planning tools to help with holistic budgeting and saving, as well as expert wellness advice from independent certified financial planners, provided by LearnVest.

The financial wellness services will be dynamically integrated into the overall participant experience within the firm’s 401(k) offering. Putnam has built an interactive user experience for plan participants that seeks to shift focus beyond current account balances and allocations, and toward estimated monthly income needs in retirement in a more holistic approach.

5) Everence and Praxis Commit $2 Million to New World Bank Green Bond

Everence Association and the Praxis Intermediate Income Fund (MIIIA) have committed $2 million ($1 million each) to the latest green bond offering from the World Bank. Seventeen investors, including Everence and Praxis, have invested in this latest green bond offering, the proceeds from which will be used to provide global solutions to climate change, as well as economic opportunities and higher standards of living for people in developing countries.

Examples of the opportunities supported by these bonds include off-grid solar and wind installations; greater efficiency in transportation; waste management; energy-efficient housing construction; carbon reduction through reforestation and deforestation prevention; protection against floods through reforestation; and food security improvement and stress-resilient crops.

The World Bank has issued approximately $4 billion in green bonds since their introduction in 2008.

To date, more than 10% of MIIIA is invested in green bonds, community investments and other high social impact bonds to support alternative energy, immunization, medical research and local infrastructure improvements.

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Read the Sept. 6 Portfolio Products Roundup at ThinkAdvisor.

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