New Benchmarks, Names for Vanguard Funds
|Current Fund Name||Current Benchmark*||New Benchmark*||New Fund Name|
|Short-Term Govt. Bond Index||Bloomberg Barclays U.S. 1–3 Year Govt.||Bloomberg Barclays U.S. Treasury Bond 1–3 Year||Short-Term Treasury Index|
|Interm.-Term Govt. Bond Index||Bloomberg Barclays U.S. 3–10 Year Govt.||Bloomberg Barclays U.S. Treasury Bond 3–10 Year||Interm.-Term Treasury Index|
|Long-Term Govt. Bond Index||Bloomberg Barclays U.S. Long Govt.||Bloomberg Barclays U.S. Long Treasury||Long-Term Treasury Index|
Vanguard Plans Corporate Bond ETF-of-ETFs
Earlier this week, Vanguard filed paperwork with the SEC for the planned launch of a new corporate bond exchange-traded fund (ETF) in 2017’s fourth quarter, more than 30 years after it debuted the first U.S. bond index fund. The proposed offering seeks to be the lowest-cost such product available to investors, with an estimated expense ratio of 0.07%, according to its preliminary prospectus.
The future product, Vanguard Total Corporate Bond ETF, intends to replicate the Bloomberg Barclays U.S. Corporate Bond Index upon its scheduled launch in November 2017.
Total Corporate Bond ETF will be available in a single ETF share class and invest in Vanguard’s existing three corporate bond ETFs: Short-Term Corporate Bond ETF, Intermediate-Term Corporate Bond ETF and Long-Term Corporate Bond ETF. Essentially, it’s a fund-of-funds, enabling the new ETF to trade at tighter spreads for less cost than investing directly in the separate components.
The lower cost is the crux of the matter here. The three funds that will make up Total Corporate Bond ETF collectively hold $39 billion in assets, providing the new offering immediately upon its launch the scale to mimic its benchmark more closely than a new fund starting from scratch. The component funds each carry a 0.07% expense ratio, meaning Total Corporate Bond ETF will cost less than half of its closest competitor, iShares iBoxx Investment Grade Corporate Bond ETF, which charges a 0.15% expense ratio.
As we’ve discussed in our decade-long coverage of mutual fund giants’ fee wars to bring costs closer to zero, the actual amount of money fund providers help investors save is less significant than the ability to claim the cheapest product on the market (from the fund companies’ perspective, at least). Vanguard Total Corporate Bond ETF will cost investors $7 for every $10,000 invested, compared to the $15 cost on the same amount in the iShares product. While this is a small absolute difference for investors, all else being equal, it makes the cheaper fund far more attractive.
About Adviser Investments
Adviser Investments operates as an independent, professional wealth management firm with expertise in Fidelity and Vanguard funds, actively managed mutual funds, ETFs, fixed-income investing, tactical strategies and financial planning. Our investment professionals focus on helping individual investors, trusts, foundations and institutions meet their investment goals. Our minimum account size is $350,000. For the fifth consecutive year, Adviser Investments was named to Barron’s list of the top 100 independent financial advisers nationwide and its list of the top advisory firms in Massachusetts in 2017. We have also been recognized on the Financial Times 300 Top Registered Investment Advisers list in 2014, 2015 and 2016.
For more information, please visit www.adviserinvestments.com or call 800-492-6868.
Disclaimer: This material is distributed for informational purposes only. The investment ideas and expressions of opinion may contain certain forward-looking statements and should not be viewed as recommendations, personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.
Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged.
Past performance is not an indication of future returns. The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. We do not provide legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
The Barron’s rankings consider factors such as assets under management, revenue produced for the firm, regulatory record, quality of practice and philanthropic work. This award does not consider client experience and is not indicative of future performance.
Editors at the Financial Times bestowed “elite” status on 300 firms in the U.S., as determined by assets under management, asset growth, longevity, compliance record, industry certifications and online accessibility.
© 2018 Adviser Investments, LLC. All Rights Reserved.