Vanguard Swaps out Benchmarks on Four ETFs

ETF Trends

Vanguard, the third largest exchange traded fund player in the U.S. markets, swapped out the MSCI indices on four of its U.S.-listed ETFs to University of Chicago-linked CRSP benchmarks.

On the last day of January, the Vanguard announced the change:

  • Vanguard Mega Cap Index ETF (MGC) tracks the CRSP US Mega Cap Index, replacing the MSCI US Large Cap 300 Index. Additionally, the fund changed its name from the Vanguard Mega Cap 300 ETF.
  • Vanguard Large-Cap Index ETF (VV) tracks the CRSP US Large Cap Index, replacing the MSCI US Prim market 750 Index.
  • Vanguard Mid-Cap Index ETF (VO) tracks the CRSP Mid Cap Index, replacing the MSCI US Mid Cap 450 Index.
  • Vanguard Small-Cap Index ETF (VB) tracks the CRSP US Small Cap Index, replacing the MSCI US Small Cap 1750 Index.

These will be the first Vanguard ETFs to transition to the CRSP indices. In October 2012, the fund provider announced that it would drop MSCI indices on 22 of its funds in favor of FTSE and CRSP indices. [Vanguard Shift Puts Focus on ETF Benchmarks]

Vanguard has argued that the changes would help lower costs down the line. For now, the expense ratios on the four ETFs remain the same. [Vanguard Index Trade ‘All About Costs’]

The CRSP methodology differs from other index providers. For instance, CRSP utilizes market-cap percentages, not the number of stocks, in determining boundaries between market-cap segments. Under this methodology, CRSP defines 70% of the largest stocks as mega-cap, while other indices could draw the line at the largest 100, 500 or 1,000 stocks.

Additionally, the index provider tries to prevent front-running by speculators with “packeting” to minimize turnover and transaction costs between market-cap segments and investment styles.

For more information on the indexing in ETFs, visit our indexing category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

Rates

View Comments