Vanguard on Wednesday launched an actively managed fixed income exchange-traded fund, Vanguard Multi-Sector Income Bond ETF (VGMS), that offers exposure to investment-grade credit, high-yield corporates, emerging market bonds and structured products.
The ETF brings an estimated 0.30% expense ratio, providing a cost advantage over the 0.48% asset-weighted category average, according to Vanguard. VGMS, the fund giant's seventh actively managed fixed income ETF in the United States, is managed by Michael Chang, Arvind Narayanan and Daniel Shaykevich.
“VGMS seamlessly integrates institutional-grade active investment strategies with Vanguard’s hallmark of low-cost leadership, delivering a powerful and differentiated solution for advisors and investors navigating today’s complex and fast-evolving markets,” said Sara Devereux, Vanguard Fixed Income Group's global head. “Our seasoned portfolio managers employ a rigorous top-down and bottom-up investment process, ensuring every security is meticulously evaluated and executed with precision and purpose.”
“Active fixed income ETFs are increasingly favored by advisors and clients for their low costs, tax efficiency, and potential to add diversification and alpha to portfolios,” said Amma Boateng, Vanguard Financial Advisor Services managing director.
Jeff DeMaso, Independent Vanguard Adviser editor, said the new ETF is effectively a clone of the Multi-Sector Income mutual fund, although technically a separate vehicle, noting that the two share the same management team.
The 0.30% expense ratio is identical to the mutual fund's Admiral share class (VMSAX), making it a cost-effective choice for smaller investors without the $50,000 minimum for the Admiral shares, and is 0.15 points cheaper than the Investor shares (VMSIX), DeMaso wrote in his newsletter.
"Still, I’m not rushing to buy the new ETF," DeMaso wrote, saying that junk bonds don't offer enough additional yield to justify the risk.
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