Vanguard’s latest entry into the ETF world, the Vanguard FTSE All-World ex-US Small-Cap ETF (VSS), began trading yesterday (April 6, 2009). The new ETF seeks to track a benchmark index of international small-cap companies in both developed and emerging markets.

According to the press release:

“VSS holds approximately 2,100 securities and has an expense ratio of 0.38%, making it lower-cost and more broadly diversified than the other small-cap international-focused ETFs available today. It is the only international small-cap ETF in the marketplace to cover both developed and emerging international markets.”

In addition to the ETF share class, Vanguard is also offering traditional open-end mutual fund Investor Shares (VFSVX) and Institutional Shares (VFSNX). The underlying index is the FTSE Global Small Cap ex US Index, a benchmark of approximately 3,300 stocks from 47 countries. Vanguard intends to use sampling techniques to get the actual number of holdings down to approximately 2,100.

The fact sheet indicates that the largest country allocations are Japan at 19.2%, United Kingdom 16.0%, Canada 11.1%, France 4.8%, Switzerland 4.5%, Germany 4.4%, Taiwan 3.9%, Australia 3.1%, and South Korea 3.0%.

This should be a solid addition to the ETF space as well as the Vanguard lineup, which now has 39 ETFs.