On Thursday, Vanguard released two new active bond ETFs. These funds offer different perspectives in terms of municipal bond investing.
“These new ETFs combine our top-tier active fixed income capabilities with our expert municipal bond team, all within an actively managed ETF wrapper that’s becoming an essential for many investors,” noted Sara Devereux, global head of Vanguard Fixed Income Group.
A Core Muni Strategy
The Vanguard Core Tax-Exempt Bond ETF offers an active core muni strategy. Despite being an actively managed fund, VCRM has a relatively low net expense ratio of 12 basis points.
Primarily, VCRM invests its assets towards U.S. muni bonds. In particular, the fund focuses on muni bonds with interest that is exempt from federal income taxes, along with the federal alternative minimum tax.
The fund may invest in bonds of any quality, but will mostly fixate on investment-grade securities. VCRM intends to maintain an intermediate portfolio duration between eight and 20 years.
Opting for Shorter Duration
Meanwhile, the Vanguard Short Duration Tax-Exempt Bond ETF offers a relatively shorter portfolio. This fund’s average maturity is slated to sit between two and seven years.
Aside from its portfolio duration, VSDM has a few similar characteristics to VCRM. As the fund’s title implies, VSDM also looks for U.S. muni bonds with interest exempt from the federal alternative minimum tax and federal income taxes.
Much like VCRM, VSDM currently possesses a net expense ratio of 0.12%. These funds can function as extremely cost-efficient vehicles to access Vanguard’s extensive fixed income strategy.
“We envision these ETFs playing an integral role in investors’ portfolios; with Vanguard Core Tax-Exempt sitting centrally as part of their tax-exempt allocation and Vanguard Short Duration Tax-Exempt leveraging our expert active capabilities, helping investors to get the most out of their short-term allocation,” added Devereux.
Vanguard has over 80 ETFs listed in the United States, with many of its funds offering dynamic bond strategies. One of the largest Vanguard fixed income ETFs, the Vanguard Total Bond Market ETF (BND ), has over $117 billion in assets under management.
“Vanguard has tremendous active management expertise to leverage and support ETF investors,” added Todd Rosenbluth, head of research at VettaFi. “Demand for fixed income ETFs has never been stronger, but advisors and investors will benefit from more low cost choices."
For more news, information, and analysis, visit the Fixed Income Channel.
