“What’s new?”
That’s a question we hear a lot at Vanguard, especially as ETFs have proliferated.
With the industry offering more than 1,400 ETF products, investors may feel as if they are shopping in the Mall of America. At Vanguard, we have a singular focus—our clients.
When it comes to investments, client focus means we are committed to providing products that can play an enduring role in a portfolio. That doesn’t mean new ideas are ignored. To the contrary, they are studied and researched thoroughly. We may not introduce products often, but we are vigilant in monitoring the markets for investment trends and new developments.
Often, we like an idea, but it may not work for us for a variety of reasons. Most important, a new Vanguard product must satisfy the three principles that drive our fund-development philosophy. First, Vanguard will offer products that can serve as building blocks in a well-constructed portfolio. Second, there must be a high-quality benchmark that Vanguard can manage the fund against. And finally, we must be able to manage to that benchmark efficiently and effectively.
This careful, deliberate approach can benefit your business. Instead of spending hours explaining dozens of funds, you can help clients identify and achieve financial goals, such as leaving a charitable legacy. Instead of tinkering with strategies based on the latest market whim, you can choose from 67 Vanguard ETFs® to help build diversified, long-term portfolios aimed at increasing assets and mitigating risk. This gives you more time to deepen client relationships and cultivate new ones.
You can also assure clients that you are using products from a company with a long tradition of index-fund innovation and expertise. Many of the indexing practices and methodologies Vanguard advocates have become industry standards.
At Vanguard, we don’t take advantage of the latest investment fad. We’re strictly horse-before-the-cart investors. We choose indexes that capture the risks and rewards of key market segments at low cost.
And we don’t slice and dice. As Vanguard CEO Bill McNabb has said, “You’re not likely to see a Micro-Cap Unhedged Russian Biotech Value ETF from Vanguard.”
You will, however, see us seize opportunities to develop excellent products that we believe will last for decades.
Let me give you an example. For years we wanted to offer a total international bond ETF because that asset class can temper the risks of U.S. stocks and bonds. Until recently, portions of the international bond markets were illiquid, costly, and challenging to navigate. As those markets have expanded and taken on more of the positive characteristics of U.S. markets, liquidity has increased and expenses have fallen, leading us to launch Vanguard Total International Bond ETF.
This ETF buys investment-grade corporate and sovereign bonds, securities whose credit quality is considered sufficient to ensure timely payment of principal and interest under current economic circumstances. Our Total International Bond ETF also hedges against currency risk.
At Vanguard, the answer to “What’s new?” always leads to another question: “What can we build to last?”
Martha King is head of U.S. Financial Intermediaries and managing director of the Vanguard Financial Advisor Services Division.