The Vanguard Group is expanding its active management footprint with a new short-term bond ETF due to launch by April.
The Malvern, Pennsylvania-based asset manager has filed with the Securities and Exchange Commission for Vanguard Short Duration Bond ETF (VSDB).
In terms of portfolio positioning, VSDB will have an average duration of 2.9 years and is designed to fit between a core bond fund and an ultra-short-term bond fund, according to Sam Martinez, head of active fixed income products at Vanguard.
“This ETF will have a reasonable yield and income without overextending duration,” he said, adding that a “slightly longer average duration” will be more suitable for long-term investors.
VSDB, which will have an expense ratio of 0.15%, represents the latest example of Vanguard’s expansion into actively managed ETFs.
“Vanguard continues to tiptoe into the active ETF space, where the issuer has seen limited success,” said Sumit Roy, senior ETF analyst at etf.com. “The firm’s total AUM in active ETFs is less than $9 billion, which is a small fraction of the amount 3 trillion dollars it’s on all ETFs.”
As for the timing of the active bond ETF, Martinez said it is not tied to any particular point in the market or economic cycle.
“We think very long term and very strategic,” he said. “We want to ensure that investors have the best tools available to them for their long-term investment needs.”
According to Vanguard announcementthe new exchange-traded fund will offer diversified exposure primarily to short-term US investment-grade bonds, including some exposure to structured products such as asset-backed securities, with the flexibility to invest in sub-investment-grade debt and emerging markets for additional yield.
As for Vanguard’s reputation as a low-cost passive management shop, Martinez countered, stressing that “our team is a very capable active manager,” adding, “It makes sense for Vanguard to bring our capabilities to the active ETF space.”
