Vanguard, one of the largest ETF issuers in the world, has announced the launch of two new active fixed-income ETFs for the first time in two years. The Vanguard Core Bond ETF (VCRB) and the Vanguard Core-Plus Bond ETF (VPLS) are expected to be available by the end of the year, according to a statement released on Sept. 22.
The new ETFs aim to provide investors with exposure to a diversified range of credit qualities and maturities in the US bond market, with different levels of risk and return. The Vanguard Core Bond ETF will invest mainly in investment-grade securities, while the Core-Plus Bond ETF will have more flexibility to allocate to high-yield and emerging market bonds.
Low-Cost and Flexible
The new ETFs will offer investors access to Vanguard’s active investment talent at a low cost and with the convenience and flexibility of the ETF structure, said Dan Reyes, head of Vanguard Portfolio Review Department. The Vanguard Core Bond ETF will have an expense ratio of 0.10%, while the Vanguard Core-Plus Bond ETF will charge 0.20%. The average expense ratio for fixed-income ETFs is 0.34%, according to etf.com data.
The new ETFs will also benefit from Vanguard’s patented ETF share class structure, which allows the ETFs to share the same portfolio and trading characteristics as their corresponding mutual funds. This means that the ETFs will have the same investment objectives, strategies, risks, and performance as the Vanguard Core Bond Fund Investor Shares (VCORX) and the Core-Plus Bond Fund Investor Shares (VCPIX), which have expense ratios of 0.2% and 0.3%, respectively.
Active Demand
The launch of the new ETFs reflects the growing demand for active fixed-income products, especially in the current interest-rate environment. Investors may want a more experienced hand at the wheel to navigate a different market environment, said Todd Sohn, ETF and technical strategist at Strategas Securities.
Vanguard is also aware of the major competition brewing within the active bond space, so an ETF offering makes sense from a product lineup view, Sohn added. Vanguard has six actively managed ETFs in its lineup, and launched just three ETFs in total in the past three years, according to data compiled by Bloomberg. The last active ETF Vanguard launched was the Vanguard Ultra Short Bond ETF (VUSB), which has garnered about $4 billion in assets since its launch in April 2021.
