Tag Archives: vanguard etf

Vanguard To Launch Its First Ever Muni Bond ETF

MarketMuse update profiles the largest mutual funds provider, Vanguard push to become the top ETF provider. Currently,  Vanguard is the second-largest provider of exchange-traded funds (ETFs) in the world, with about $451 billion in ETF assets under management, as of March 2015. Now Vanguard seeks to become the top ETF provider with its first ever muni bond, the Vanguard Tax Exempt Bond ETF. The MarketMuse update is courtesy of an article from Investopedia’s 20 March article “Vanguard to Launch Muni Bond ETF”. Extracts from the article are below:  

Vanguard, well known for its stable of index mutual funds and exchange-traded funds (ETFs), is rolling out its first muni bond index fund, the Vanguard Tax Exempt Bond ETF. The fund, which will have a mutual fund share class as well, doesn’t have a ticker symbol yet. This is Vanguard’s first muni bond index fund.

Muni bonds typically appeal to investors in a higher income tax bracket and are held in taxable investment accounts. The ETF will track the S&P National AMT Free Municipal Bond Index. The index currently yields 1.7% which equates to a 2.5% yield for those in the 33% income tax bracket.

The new fund is in line with Vanguard’s big push in the ETF space. Vanguard is currently the third largest issuer of ETFs and has been aggressively cutting expenses in an effort to build its asset base. It recently lowered expenses on 12 of its equity ETFs including 10 sector ETFs. Vanguard currently has 13 fixed-income ETFs including the giant Vanguard Total Bond Market ETF (BND) with more than $24 billion in assets.

The Vanguard Tax Exempt Bond ETF (and associated mutual fund share classes) will likely be a viable competitor in the muni bond space right out of the box. The low expense ratio of 0.12% is less than half that of the largest index ETF competitor. Add to this Vanguard’s solid reputation as an index fund provider and its distribution muscle and the new fund will be well positioned to gain market share in this asset class.

To read the entire article from Investopedia, click here.

Vanguard Files For The Company’s First Muni Bond ETF

MarketMuse update courtesy of ETF Trends’ Tom Lydon’s 6 January story.

Vanguard, the third-largest U.S. issuer of exchange traded funds, has filed plans with the Securities and Exchange Commission to introduce the firm’s municipal bond ETF.

The Vanguard Tax-Exempt Bond Index Fund will be the firm’s first tax-exempt index fund and ETF. Pennsylvania-based Vanguard already has a substantial municipal bond footprint with about $140 billion in tax-exempt bond and money market funds, according to a statement issued by the firm.

Vanguard offers 12 actively managed municipal bond funds (five national, seven state-specific) and six tax-exempt money market funds (one national, five state-specific), according to the statement.

The Vanguard Tax-Exempt Bond Index Fund is expected to debut in the second quarter with three share classes – Investor Shares, Admiral Shares and ETF. The new ETF will have an annual expense ratio of 0.12%, well below the average annual fee of 0.49% on municipal bond ETFs, said Vanguard, citing Lipper data.

The statement did not include a ticker for the new ETF.

“For investors in high tax brackets, a high-quality, broadly diversified municipal bond fund or ETF can provide tax advantages as well as diversification from the risks of the equity market,” said Vanguard CEO Bill McNabb in the statement. “Vanguard is pleased to bring a low-cost index option to the municipal category as a complement to our lineup of low-cost actively managed tax-exempt bond funds.”

That jibes with Vanguard’s reputation for being one of the low-cost leaders in the ETF space. In December, Vanguard lowered fees on 12 of its equity-based ETFs, including 10 sector funds, moving the issuer into a tie with Fidelity for the least expensive sector ETFs.

Vanguard currently sponsors 13 fixed income ETFs, including the behemoth VanguardTotal Bond Market ETF (NYSEArca: BND). Home to nearly $24 billion in assets under management, BND was one of 2014’s top asset-gathering ETFs. Other Vanguard bond ETFs include the Vanguard Extended Duration Treasury ETF (NYSEArca: EDV) and the Vanguard Total International Bond ETF (NYSEArca: BNDX), two last year’s top performing bond funds.

Last year, investors poured a record $215.5 billion into Vanguard funds, including $75.3 billion into Vanguard ETFs. Including BND, four Vanguard ETFs were among the top 10 asset-gathering ETFs in 2014.

For the original story in ETF Trends, click here.


Institutional Investor: Vanguard’s Risky Switch in ETF Indexes

ii_logo_240px-wide  Courtesy of Rosalyn Retkwa

When it comes to the broad-based emerging-markets equity ETFs, Vanguard’s MSCI Emerging Markets ETF (VWO) is clearly the top dog. As of December 11, VWO had a market cap of $58.66 billion and an average daily volume of 17.74 million shares.

But back on October 2, Vanguard rocked the ETF world when it said it would drop MSCI of New York City as its index provider on 22 ETFs and substitute two other index providers, in the belief that by doing so, it could achieve “considerable savings for the funds’ shareholders over time.” That includes VWO, which will transition to a FTSE index at some unspecified point next year. Vanguard has been deliberately vague about any sort of schedule.

“We’re not saying exactly when the transitions will begin in order to prevent front-running,” says Joel Dickson, a senior investment strategist and principal in Vanguard’s Investment Strategy Group in Malvern, Pennsylvania. “The transitions will be staggered over several months,” he says, noting that VWO “will take longer than the other funds because it will be divesting all of its holdings in South Korea and investing the proceeds in some markets that are less liquid.”

And VWO’s exposure to South Korea is the problem. As of its latest statement on October 31, VWO had a 15.3 percent weighting in South Korea, including its No. 1 stock holding, Samsung Electronics. And that entire position will have to be eliminated when VWO moves from the MSCI index to the FTSE index.

Among index providers, there’s a vigorous debate as to whether South Korea should be classified as emerging or developed, and while MSCI still considers it to be emerging because of stock market and currency constraints, FTSE upgraded it to the developed-nation status in September of 2008, and implemented the change a year later, says Jonathan Horton, the New York City–based president of FTSE North America and head of its exchange-traded product unit. There’s also a budding price war among ETF sponsors.

Dong Lee CFA WallachBeth Capital
Dong Lee, CFA WallachBeth Capital

Still, the change in benchmarks is “a headache” for some institutional investors, says Dong Lee, the director of institutional sales at New York City’s WallachBeth Capital.  It often means they “have to present the investment case for the switch in indices in order to obtain board approval; and there’s a lot of work involved in that,” he says.

But will institutional investors switch to that other big dog of the category, BlackRock’s iShares MSCI Emerging Markets Index Fund (EEM), and in the process pay a much higher expense ratio of 67 basis points versus VWO’s 20 basis points to stick with MSCI? Continue reading

Vanguard Cuts Expense Fee on 6 Big ETFs-Cheap access to Emerging Markets Just Got Cheaper

Courtesy of InvestmentNews reporter Jason Kephart.


Vanguard Group, one of the world’s biggest issuers of ETFs, has announced they’re cutting the fees on 6 funds, including the world’s 3rd largest ETF by asset size, the $54 billion, EMG flagship “Vanguard MSCI Emerging Markets ETF” (VWO),  to 0.2%, a 9% reduction.

Not to let a good idea go to waste, fee reductions saving investors $15 million +/- in annual expenses will enure to the benefit of those buying the Vanguard Total World Stock ETF  (NYSE Arca: VT), the Vanguard All-World ex-U.S. ETF (VEU), the Vanguard FTSE All-World ex-U.S. Small Cap (VSS), the Vanguard Total International Stock Index (VXUS) and the Vanguard High Dividend Yield ETF (VYM).

Of course, there’s more to an ETF than just the expense ratio. Morningstar Inc. analyst Paul Justice said that when it comes to selecting the right fund, index-tracking and liquidity are as important, if not more so, than the expense ratio.

He added that Vanguard’s emerging-markets ETF has grown to its present size because it’s been the leader in all three of those categories for the longest period of time.”

To read the full article from InvestmentNews, click here