Vanguard last week announced plans to launch three new exchange-traded funds focused on U.S. government bonds, including a fund linked to returns for Treasury inflation-protected securities, or TIPS.
All three will launch around July 1, according to a preliminary prospectus that the asset manager filed with the Securities and Exchange Commission.
The Vanguard Total Treasury ETF (VTG) and Vanguard Total Inflation-Protected Securities ETF (VTP) will broaden Vanguard’s lineup of low-cost fixed income index ETFs with all-curve exposure to, respectively, the broad U.S. Treasury market and TIPS, a Vanguard spokesperson told ThinkAdvisor by email Wednesday.
The Vanguard Government Securities Active ETF (VGVT) will offer all-curve, actively managed exposure to U.S. Treasury and agency securities, bringing "the benefits of Vanguard’s active fixed income capabilities to even more investors through the increasingly popular ETF structure," the spokesperson said.
Vanguard Total Inflation-Protected Securities ETF will have an estimated 0.05% expense ratio at launch, Vanguard Total Treasury ETF an expected 0.03% expense ratio and Vanguard Government Securities Active ETF an anticipated 0.10% expense ratio.
"Vanguard’s combination of deep active investment expertise and our low expense ratios offer a compelling option for investors seeking high-quality fixed income exposure that can act as a diversifier to equities," the spokesperson said.
VGVT will have the ability to invest in the full spectrum of U.S. government and agency bonds and, selectively, non-government issues such as high-quality asset-backed securities and non-agency mortgage-backed securities, in an effort to outperform the broad Treasury market, the firm said.
"Many investors, particularly those near or in retirement, use TIPS to help protect their portfolios from inflation risk. VTP will provide long-term investors exposure to the full spectrum of the U.S. TIPS market," and will join the existing Vanguard Short-Term Inflation Protected ETF (VTIP) in Vthe asset manager's indexed inflation-protected ETF lineup.
VTP will have a broader investment universe and longer duration profile than Vanguard Short-Term Inflation Protected ETF.
U.S. Treasurys, the largest and most liquid component of the fixed income investing universe, account for about 45% of the Bloomberg U.S. Aggregate Index, the fund giant noted. The new Total Treasury ETF (VTG) will cover the full spectrum of the U.S. Treasury market, the spokesperson said.
"Vanguard keeps plugging holes in its bond ETF lineup," editor Jeff DeMason wrote Wednesday in his Independent Vanguard Advisor newsletter.
He noted that the Total Inflation-Protected ETF will bring a "rock bottom" expense ratio and will be managed by Vanguard's bond indexing "go-to guy" Joshua Barrickman. He will also manage the Total Treasury ETF.
The Total Inflation-Protected Securities ETF also will launch a race between "man and machine," as it will compete with the actively managed Inflation Protected Securities (VIPSX), DeMaso said.
"TIPS have become more popular lately because they are priced to deliver inflation-beating returns for the first time in roughly a decade," he wrote.
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