Vanguard to Launch 2 New Active Bond ETFs
The ETFs should provide investors with broadly diversified, single-fund fixed-income holdings, Vanguard said.
Vanguard plans to introduce two active fixed income exchange-traded funds by year end, the company announced Friday. The Vanguard Core Bond ETF (VCRB) and Vanguard Core-Plus Bond ETF (VPLS) will be managed by the mutual fund giant’s fixed income group.
Why it matters: Vanguard’s fixed income group is the world’s largest bond mutual fund and ETF manager, overseeing more than $2.1 trillion in global assets under management. For the decade ending June 30 this year, 95% of Vanguard active bond funds outperformed their peer group averages, the company said.
What to know: “These new ETFs will offer investors access to Vanguard’s world-class active investment talent at a low cost and with the convenience and flexibility offered by the ETF structure,” Dan Reyes, head of Vanguard’s portfolio review department, said.
The funds are designed to provide investors with single-fund fixed income holdings that are broadly diversified across a range of sectors, credit qualities and maturities.
- The Vanguard Core Bond ETF will offer exposure primarily to U.S. investment-grade securities with modest allocations to riskier sectors, such as U.S. high-yield corporates and emerging markets, the firm said. Vanguard estimates the fund’s expense ratio will be 0.10%.
- The Vanguard Core-Plus Bond ETF will be similar but with flexibility to add greater allocations in both U.S. high-yield corporates and emerging markets. The company expect this ETF’s expense ratio to be set at 0.20%.
- The two ETFs will share the benchmarks, management teams and expense ratios of the admiral share classes of their respective mutual fund counterparts, but will be distinct products, with some differences in holdings and performance, according to Vanguard.
Looking deeper: Vanguard became the world’s second-largest ETF manager at least partly because it used a one-of-a-kind structure that allowed it to offer ETFs as a mutual fund share class. The firm’s patent on the tax-friendly structure expired in May, and other firms have since sought regulatory approval to offer similarly arranged ETFs.