Vanguard Group, a provider known for its low-cost, passive index-based exchange traded funds, has stepped into the actively managed game with six new factor-focused active strategies.
On Thursday, Vanguard launched six actively managed ETFs, including:
- Vanguard U.S. Minimum Volatility ETF (Cboe: VFMV) seeks to provide long-term capital appreciation with lower volatility relative to the broad U.S. equity market.
- Vanguard U.S. Value Factor ETF (Cboe: VFVA) seeks to provide long-term capital appreciation by investing in stocks with relatively lower share prices relative to fundamental values.
- Vanguard U.S. Momentum Factor ETF (Cboe: VFMO) seeks to provide long-term capital appreciation by investing in stocks with strong recent performance.
- Vanguard U.S. Liquidity Factor ETF (Cboe: VFLQ) seeks to provide long-term capital appreciation by investing in stocks with lower measures of trading liquidity.
- Vanguard U.S. Quality Factor ETF (Cboe: VFQY) seeks to provide long-term capital appreciation by investing in stocks with strong fundamentals.
- Vanguard U.S. Multifactor ETF (Cboe: VFMF) seeks to provide long-term capital appreciation by investing in stocks with relatively strong recent performance, strong fundamentals, and low prices relative to fundamentals.
Each of the single factor-specific active ETFs come with a 0.13% expense ratio, whereas the multifactor ETF has a 0.18% expense ratio. These are seen as an extension of Vanguard’s low-cost active lineup, which have outperformed their peer group averages over the past 5- and 10-year periods – 91% and 93%, respectively.
Antonio Picca, Senior Portfolio Manager, and Liqian Ren, Portfolio Manager, in Vanguard’s Quantitative Equity Group will manage all the U.S. Factor Funds.
“The newly launched factor funds further broaden our active equity lineup and represent a differentiated approach – disciplined, rules-based, targeted exposure to factors – along with Vanguard’s low costs,” Vanguard CEO Tim Buckley said in a note. “The funds are aimed primarily at financial advisors and institutional investors, who we believe understand the risks of potential underperformance and can effectively incorporate factor funds into their portfolios.”
Factor investing can be used in a number of ways, including static tilts, active fund substitution and portfolio completion, according to Vanguard.
The new ETFs are seen as a stark contrast from the ETF provider’s “plain vanilla” products. Furthermore, while smart beta or factor-based ETF strategies are not uncommon, Vanguard has taken up the factor-based approach through an actively managed style as opposed to other factor options that follow a passive rules-based indexing methodology. With an active management team, these new Vanguard ETFs may be better able to adapt and monitor potential decays in their factor tilts over time.
For more information on new fund products, visit our new ETFs category.