Vanguard plans to launch two active fixed income ETFs at the end of the year. They are the Vanguard Core Bond ETF (VCRB) and the Vanguard Core-Plus Bond ETF (VPLS). The funds are designed to provide clients with single-fund fixed income holdings broadly diversified across sectors, credit qualities, and maturities.
The active mandates of these ETFs enable the portfolio managers to seek the best opportunities while remaining risk aware.
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VCRB will offer exposure primarily to U.S. investment-grade securities with modest allocations to riskier sectors. This includes U.S. high-yield corporates and emerging markets. VPLS will be similarly constructed, but can add greater allocations to both U.S. high-yield corporates and emerging markets.
VCRB will have an expense ratio of 0.10%, while VPLS will have an estimated expense ratio of 0.20%.
“For more than 40 years, Vanguard has delivered strong investment outcomes for our active fixed income investors across an expanding range of strategies,” said Dan Reyes, head of Vanguard’s portfolio review department. “These new ETFs will offer investors access to Vanguard’s world-class active investment talent at a low cost and with the convenience and flexibility offered by the ETF structure.”
VCRB and VPLS will share the benchmarks, management teams, and expense ratios of their respective mutual fund counterparts. However, they will be separate and distinct products.
Vanguard’s Active Edge
Vanguard CEO Tim Buckley said that “the best way to evaluate” an active manager is to see if “they can tell you what their edge is.”
“What is their active edge? It has to be one that can’t be easily duplicated. You want one edge that nobody else has,” he noted at Exchange 2023.
Buckley said that Vanguard’s edge is one “that no one else can duplicate… comes from our structures.” He was specifically referring to Vanguard’s ability to deliver fees lower “than almost everybody out there,” and in turn, these low fees don’t spur Vanguard to take unnecessary risks.
“You don’t have to take that extra spread or go out on credit quality and take extra risks there,” he added.
For more news, information, and analysis, visit the Fixed Income Channel.