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5 ETFs Behind Vanguard's Success in 2017

Sweta Killa
Exxon Mobil (XOM) closed at $81.85 in the latest trading session, marking a +0.43% move from the prior day.

The ETF industry is growing rapidly with the three largest providers, BlackRock BLK, Vanguard and State Street, dominating the United States market.

In particular, Vanguard has become extremely bigger than what it was eight years ago. This is especially true as Vanguard’s total assets under management more than quadrupled to $4.8 trillion from $1.1 trillion in 2009. The passively managed funds accounted for 91% of inflows through the first 10 months of this year compared with 78% in 2009.

Net flows into Vanguard funds so far this year accounted for about 51% of total net flows into all U.S. mutual funds and ETFs, according to Morningstar. The money management giant pulled in nearly $300 billion new cash in the first nine months and is on track to collect a record $350 billion this year. The explosive growth was driven by investors’ drive for low-cost passively managed funds, which directly track the performance of indexes (read: Will Low Cost ETF Strength Make Vanguard Top Asset Manager Soon?).

That said, we have highlighted five popular Vanguard ETFs that have been embraced by investors this year and will continue to grow in the months ahead.

Vanguard FTSE Developed Markets ETF VEA

This fund offers exposure to stocks in the developed market by tracking FTSE Developed All Cap ex US Index. It has accumulated around $16.2 billion in capital so far this year, propelling its AUM to $65.2 billion. The ETF holds a broad basket of 3850 stock with none accounting for more than 1.4% of assets. It charges just 7 bps in fees per year and trades in a heavy volume of 7.2 million shares on average. The fund has gained 22.9% this year and carries a Zacks ETF Rank #2 (Buy) with a Low risk outlook.

Vanguard S&P 500 VOO

VOO have gathered nearly $13.3 billion in its asset base this year. This has taken the fund’s total AUM to $79 billion. The ETF tracks the S&P 500 index, and holds 507 stocks in its basket with each accounting for less than 4% of assets. It is slightly tilted toward information technology with one-fourth share, while financials, health care, consumer discretionary and industrials make up for a double-digit allocation each. It is a low-cost choice in the space, charging only 4 bps in fees per year and trades in solid volume of 1.8 million shares a day. It has returned 17.4% this year and holds a Zacks ETF Rank #2 with a Medium risk outlook (read: S&P 500 ETFs Face Off: SPY Versus IVV).

Vanguard FTSE Emerging Markets ETF VWO

With AUM of $64.2 billion and average daily volume of 10 million shares, this fund targets emerging market stocks around the world. It tracks the FTSE Emerging Index and holds 4718 securities in its basket with none holding more than 4.6% of assets. Here, financials is the top sector accounting for 25%, followed by technology (20%), and consumer discretionary (10%). Chinese firms dominate the fund’s portfolio at nearly 29%, closely followed by Taiwan (15%) and India (11%). VWO has pulled in $9.6 billion in its assets this year and charges 14 bps in annual fees. It has gained 27.2% this year and carries a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Emerging Markets Leading This Year: 5 Top-Performing ETFs).

Vanguard Intermediate-Term Corporate Bond ETF VCIT

This product has attracted $7.5 billion in capital, pushing up its total asset base to $18 billion. It tracks the Bloomberg Barclays U.S. 5-10 Year Corporate Bond Index and targets the intermediate end of the yield curve with average maturity of 7.5 years. Effective duration is 6.4 years, suggesting a relatively higher level of interest rate risk. Holding 1741 securities, the ETF invests in high-quality (investment-grade) corporate bond and charges 7 bps in fees per year from investors. It also trades in a heavy volume of more than million shares, indicating low trading cost. The fund is up 4.7% so far this year and has a Zacks ETF Rank #3 with a Medium risk outlook.

Vanguard Total Stock Market ETF VTI

This ETF offering exposure to the broad U.S. stock market across growth and value styles has seen inflows of $7 billion this year. It has AUM of $87 billion and average daily volume of about 2 million shares. The fund follows the CRSP US Total Market Index, and holds a broad basket of 3599 securities with none accounting for more than 3% share. The top five sectors include financials, information technology, industrials, healthcare and consumer services that make up for a double-digit allocation each. The fund charges 4 bps in annual fees and has gained 16.8% this year (read: Why Are ETFs Beating Hedge Funds on Assets & Returns?).

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