Vanguard plans to add Ultra-Short Bond ETF to lineup
Vanguard has filed an initial registration statement with the U.S. Securities and Exchange Commission for the proposed launch of Vanguard Ultra-Short Bond ETF during the second quarter of 2021. The new ETF will serve as a low-cost, diversified option for investors seeking current income and limited price volatility.
The actively managed ETF will be separate from but have a similar strategy to that of the $16.0 billion Vanguard Ultra-Short-Term Bond Fund (Investor Shares: VUBFX; Admiral™ Shares: VUSFX) and will be managed by the same portfolio management team as the mutual fund. It will have an estimated expense ratio of 0.10%, compared with the average expense ratio for ultra-short-term bond ETFs of 0.22%.*
Like the existing Ultra-Short-Term Bond Fund, the Ultra-Short Bond ETF will invest in a diversified portfolio of high-quality and, to a lesser extent, medium-quality fixed income securities, including investment-grade credit and government debt. The ETF will use the same benchmark as the mutual fund, the Bloomberg Barclays U.S. Treasury Bellwethers: 1 Year Index. It will target the same average duration—approximately 1 year. (Duration is a measure of the sensitivity of bond prices to interest rate movements.)
“Vanguard Ultra-Short Bond ETF will offer the features of an ETF structure for investors seeking a solution for anticipated cash needs in the range of 6 to 18 months,” said Kaitlyn Caughlin, head of Vanguard Portfolio Review Department. “An ultra-short strategy bridges the gap between money market funds offering a stable share price and short-term bond funds that are suited for investment horizons of 18 months to 3 years.”
The management team
Vanguard Ultra-Short Bond ETF will be managed by the Active Taxable Fixed Income Team in Vanguard Fixed Income Group, one of the world’s largest fixed income managers with oversight of $2 trillion in global assets as of December 31, 2020. The Active Taxable Team has managed an existing ultra-short-term bond fund strategy since 2015.
The new ETF will be co-managed by Samuel C. Martinez, CFA®, Arvind Narayanan, CFA, and Daniel Shaykevich. Mr. Martinez has been with Vanguard since 2007 and has worked in investment management since 2010. Mr. Narayanan has worked in investment management since 2002 and has been with Vanguard since February 2019. Mr. Shaykevich, a principal at Vanguard, has worked in investment management since 2001 and has been with Vanguard since 2013.
The Fixed Income Group comprises 190 investment professionals, about 100 of whom are dedicated to our actively managed taxable fixed income strategies. Using its deep investment capabilities, disciplined security selection process, and rigorous risk management techniques, the team seeks to deliver consistent, long-term performance to Vanguard clients.
Vanguard has offered ETFs since 2001 and seeks to meet the needs of a diverse set of investors today with 19 U.S.-domiciled fixed income ETFs representing $298.6 billion in client assets as of December 31, 2020.**
*Source: Average expense ratios for ultra-short-term bond investments are 0.45% for mutual funds and 0.22% for ETFs, an overall average of 0.43%, as of December 31, 2020, according to Lipper, a Thomson Reuters Company.
A registration statement relating to Vanguard Ultra-Short Bond ETF has been filed with the Securities and Exchange Commission (SEC) but has not yet become effective.The SEC has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is considered a criminal offense. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This communication shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of, these securities in any state in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state.
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