Vanguard Launches New Bond ETFs

November 24, 2009 by  
Filed under Commentary, ETF IPOs (New ETFs), ETFs

Mutual fund behemoth Vanguard rolled out seven new bond ETFs this week.  Collectively called “Vanguard Sector Bond Index Funds,” the new funds increase the number of Vanguard bond ETFs to 12 and the total Vanguard ETF count to 47.  There wasn’t much fanfare about the launch and we wonder why Vanguard would make its move in a holiday week.  Presumably someone thought it would be a good idea.

Vanguard ETFs have a different structure than most.  Instead of stand-alone funds, their ETFs are separate share classes of corresponding open-end mutual funds.  This brings some efficiencies on both sides.   Vanguard was relatively late to enter the ETF business but has built up a fairly comprehensive product line in recent years.  This should work to the firm’s benefit as investors lose confidence in actively-managed mutual funds.  Whether you want to index in an ETF or a mutual fund, Vanguard has you covered.

Here are the newly-launched ETFs.  Click the name to go to a summary page on the Vanguard site.

There appears to be some confusion about the ticker symbol for Vanguard Short-Term Corporate ETF.  The Vanguard site, linked above, says it is VCHS, including within the prospectus.  The Vanguard press release and the actual Nasdaq listing says it is VCSH.  My quote service shows trading is underway with the symbol VCSH, while I get only error messages when I look for a VCHS quote.  Clearly both can’t be right, but whether the mistake was made by Nasdaq or Vanguard is uncertain at this point.

Whatever the right symbols are, these funds fill a gap in Vanguard’s menu by allowing bond investors to hold government or corporate bonds at three different maturity levels.  Most of the firm’s previous bond ETFs were a mixture of both.  VMBS also covers the mortgage-backed securities niche, previously unavailable through Vanguard.

Vanguard has a reputation for low fees and the new bond ETFs carry on the tradition with a 0.15% expense ratio.  Trading was very light on opening day, but we suspect these funds will survive for the long run.

Disclosure compliant with FTC 16 CFR Part 255 covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

Comments

Comments are closed.

Free Special Report

With interest rates near zero, how can you generate income with your nest egg? Our free special report shows you how. cover art
You will also receive our weekly market commentary and unique analysis based on our Edge Charts. Privacy

The Market Today

Subscribe to Commentary

Sign up HERE to get breaking news from Invest With An Edge & other updates.