Vanguard on Thursday announced two index international equity exchange-traded funds — Vanguard Developed Markets ex-US Value Index ETF, ticker VDV, and Vanguard Developed Markets ex-US Growth Index ETF, ticker VDG — which have a 0.08% expense ratio that the asset manager calls the lowest in the category.
The ETFs can help investors customize international allocations beyond broad-market approaches, Vanguard said.
"The new index equity international style-based ETFs offer a cost-effective index alternative in a space dominated by active strategies," said Dan Reyes, Vanguard global head of investment product. "The ETFs are designed to provide targeted exposure to developed markets equities by investment style and offer low-cost, broadly diversified options to investors in their international equity allocations."
Vanguard said the funds can be used individually for style tilts, together for developed markets exposure currently accessed through products like Vanguard FTSE Developed Markets ETF, ticker VEA, or alongside Vanguard Emerging Markets ETF, ticker VWO, for total international equity exposure.
"Vanguard is finally exporting the growth-versus-value debate," Jeff DeMaso, editor of The Independent Vanguard Adviser, said in his newsletter.
The two ETFs give investors "simple, low-cost tools to tilt their foreign stock exposure by style," he wrote, calling the funds cheap, diversified and sensible building blocks.
"But cost and convenience aren't the issue. The real question is whether a growth or value tilt is worth making in the first place," DeMaso said.
"Value stocks led after the tech bubble burst. Growth stocks dominated for more than a decade after that. And more recently, value stocks have been back on top — at least overseas. This isn't a steady edge — it's a pendulum," and the pendulum has broken its usual rhythm, he wrote.
While U.S. growth stocks have surged, driven by mega-cap tech stocks, value has led overseas recently, DeMaso noted. What happens next is unclear but investors don't have to figure it out, he suggested.
"A broad international index fund — owning both growth and value stocks — gets you to a similar place over time without asking you to pick a side," he said.
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